Filed Pursuant to Rule 424(b)(3) 

Registration No. 333-201879

May 6, 2015

Dear Pacific Ethanol, Inc. and Aventine Renewable Energy Holdings, Inc. Stockholders,

We are pleased to enclose the joint proxy statement/prospectus relating to the acquisition of Aventine Renewable Energy Holdings, Inc. (sometimes referred to as Aventine) by Pacific Ethanol, Inc. (sometimes referred to as Pacific Ethanol) through a merger. We believe this merger will allow Pacific Ethanol and Aventine to be better positioned to compete in the ethanol production and marketing industry.

In the merger, each issued and outstanding share of Aventine common stock (other than dissenting shares and shares held by Pacific Ethanol or Aventine) will be converted into the right to receive, at the election of the holder, pursuant to the terms of an election form to be distributed to all holders in advance of the special meeting and certain limitations in order to maintain the tax free treatment of the merger (i.e., no more than 20% of shares of Aventine common stock will be exchanged by the Aventine stockholders for shares of Pacific Ethanol non-voting common stock), (i) 1.25 shares of Pacific Ethanol common stock, (ii) 1.25 shares of Pacific Ethanol non-voting common stock, or (iii) a combination of Pacific Ethanol common stock and non-voting common stock resulting in such Aventine stockholder receiving a total number of shares of common stock and non-voting common stock equal to 1.25 times the number of shares of Aventine common stock held by such stockholder. Shares of Pacific Ethanol non-voting common stock are the same in all respects to shares of Pacific Ethanol’s common stock, except that holders of shares of non-voting common stock are not entitled to vote on matters submitted to Pacific Ethanol stockholders and shares of non-voting common stock are convertible into shares of common stock on a one-for-one basis no earlier than sixty-one days after such holder provides a notice of conversion to Pacific Ethanol.

The stockholders of Pacific Ethanol will continue to own their existing shares and the rights and privileges of their existing shares will not be affected by the merger. However, because Pacific Ethanol will be issuing new shares of Pacific Ethanol common stock and non-voting common stock to Aventine stockholders in the merger, the stockholders of Pacific Ethanol will experience dilution as a result of the issuance of shares in the merger and each outstanding share of Pacific Ethanol common stock immediately prior to the merger will represent a smaller percentage of the total number of shares of Pacific Ethanol common stock and non-voting common stock issued and outstanding after the merger. It is expected that Pacific Ethanol stockholders before the merger will hold approximately 58% of the total Pacific Ethanol common stock and non-voting common stock issued and outstanding immediately following completion of the merger. Thus, Pacific Ethanol stockholders before the merger will experience dilution in the amount of 42% as a result of the merger.

The value of the consideration to be received in exchange for each share of Aventine common stock will fluctuate with the market price of Pacific Ethanol common stock. Based on the closing sale price for Pacific Ethanol common stock on December 30, 2014, the last trading day before public announcement of the merger, the 1.25 exchange ratio represented approximately $13.39 in value for each share of Aventine common stock (assuming only shares of Pacific Ethanol common stock are issued in the merger). Based on the closing price for Pacific Ethanol common stock on May 1, 2015, the latest practicable date before the printing of this joint proxy statement/prospectus, the 1.25 exchange ratio represented approximately $15.29 in value for each share of Aventine common stock (assuming only shares of Pacific Ethanol common stock are issued in the merger). The value of the consideration to be received by Aventine stockholders will fluctuate with changes in the price of Pacific Ethanol common stock.

We estimate that Pacific Ethanol may issue up to an aggregate of approximately 17,755,300 shares of its common stock and non-voting common stock to Aventine stockholders as contemplated by the merger agreement. Immediately following completion of the merger, Pacific Ethanol stockholders immediately prior to the merger will own approximately 58% of Pacific Ethanol’s outstanding common stock and non-voting common stock and former Aventine stockholders will own approximately 42% of Pacific Ethanol’s outstanding common stock and non-voting common stock, in each case assuming no exercise or conversion of outstanding options and warrants. Pacific Ethanol’s common stock will continue to be listed on The NASDAQ Capital Market under the symbol “PEIX.” Pacific Ethanol’s non-voting common stock will not be listed on any stock exchange.

Pacific Ethanol stockholders are cordially invited to attend Pacific Ethanol’s annual meeting of stockholders to be held at the Sheraton Grand Sacramento, 1230 J Street, Sacramento, CA 95814 on June 11, 2015 at 9:00 a.m., local time, at which time the holders of Pacific Ethanol common stock and Series B Preferred Stock, voting together as a single class, will be asked to consider and vote upon proposals related to the merger including (i) a proposal to approve the issuance of Pacific Ethanol common stock and non-voting common stock in connection with the proposed merger, (ii) a proposal to amend Pacific Ethanol’s Certificate of Incorporation to authorize a class of non-voting common stock, and (iii) a proposal to adjourn Pacific Ethanol’s annual meeting if necessary or advisable to permit further solicitation of proxies in the event there are not sufficient votes at the time of the annual meeting to approve the above matters. The holders of Pacific Ethanol Series B Preferred Stock, voting as a separate class, will be asked to consider and vote on (x) a proposal to approve the issuance of Pacific Ethanol common stock and non-voting common stock in connection with the proposed merger, (y) a proposal to amend Pacific Ethanol’s Certificate of Incorporation to authorize a class of non-voting common stock, and (z) the agreement by the holders of Pacific Ethanol Series B Preferred Stock not to treat the merger as a liquidation, dissolution or winding up within the meaning of Pacific Ethanol’s Certificate of Designations, Powers, Preferences and Rights relating to its Series B Preferred Stock. In addition, at this year’s annual meeting, holders of Pacific Ethanol common stock and Series B Preferred Stock, voting together as a single class, will be asked to (a) elect seven directors; (b) cast an advisory vote to approve Pacific Ethanol’s executive compensation; and (c) ratify the appointment of Hein & Associates LLP to serve as Pacific Ethanol’s independent registered public accounting firm for the year ending December 31, 2015. As of the effective time of the merger, the board of directors of Pacific Ethanol will be increased to nine and will be comprised of the seven members of the Pacific Ethanol Board elected at the annual meeting of stockholders and two designees nominated by holders of the majority of shares of Aventine common stock.

Aventine stockholders are cordially invited to attend a special meeting of the stockholders to be held at the Offices of Akin Gump Strauss Hauer & Feld LLP, One Bryant Park, Bank of America Tower, New York, NY 10036-6745 on June 11, 2015 at 11:00 a.m., local time, at which time the stockholders of Aventine will be asked to consider and vote upon (i) a proposal to adopt the merger agreement and approve the merger and (ii) a proposal to adjourn Aventine’s special meeting if necessary or advisable to permit further solicitation of proxies in the event there are not sufficient votes at the time of the special meeting to adopt the merger agreement and approve the merger. It is important to note that eight holders of outstanding shares of Aventine common stock (seven of whom are affiliated with Candlewood Investment Group, LP) have entered into stockholders agreements with Pacific Ethanol, pursuant to which they have agreed to vote their pro-rata share of 51% of the issued and outstanding shares of common stock of Aventine in favor of the merger and adoption of the merger agreement, subject to the terms of the stockholder agreements.

We urge you to read the enclosed joint proxy statement/prospectus, which includes important information about the merger, Pacific Ethanol’s annual meeting and Aventine’s special meeting. In particular, see “Risk Factors” beginning on page 37 of the joint proxy statement/prospectus for a description of the risks that you should consider in evaluating the merger.

Pacific Ethanol’s board of directors (sometimes referred to as the Pacific Ethanol Board) unanimously recommends that Pacific Ethanol stockholders vote “FOR” the issuance of the shares of common stock and/or non-voting common stock, the charter amendment, and the agreement not to treat the merger as a liquidation, dissolution or winding up, “FOR” each of the nominees to the Pacific Ethanol Board, “FOR” the non-binding approval of Pacific Ethanol’s executive compensation, “FOR” the ratification of the appointment of Hein & Associates LLP, and “FOR” the other matters to be considered at the Pacific Ethanol annual meeting.

Aventine’s board of directors (sometimes referred to as the Aventine Board) unanimously recommends that Aventine stockholders vote “FOR” the adoption of the merger agreement and “FOR” the other matters to be considered at the Aventine special meeting. It should be noted that in connection with the merger, the Aventine Board will receive indemnification for acts or omissions occurring prior to the effective time of the merger. The merger agreement also provides that, prior to the effective time of the merger, Aventine will purchase “tail” officers’ and directors’ liability insurance policies on terms and conditions reasonably comparable to Aventine’s existing directors’ and officers’ liability insurance. See, “Additional Interests of Certain of Aventine’s Directors and Executive Officers in the Merger” beginning on page 205 of the joint proxy statement/prospectus.

Your vote is very important. Whether or not you plan to attend your respective company’s meeting of stockholders, please submit your proxy as soon as possible to make sure that your shares are represented at that meeting. Information about these meetings, the merger and the other business to be considered by stockholders is contained in this joint proxy statement/prospectus. We urge you to read this joint proxy statement/prospectus carefully. Assuming stockholder approval is obtained at the stockholder meetings to be held on June 11, 2015, the parties may elect to delay the closing of the transaction up to July 1, 2015 in order to facilitate financial integration.

Sincerely,		Sincerely,
Neil M. Koehler		Mark Beemer
President and Chief Executive Officer		Chief Executive Officer
Pacific Ethanol, Inc.		Aventine Renewable Energy Holdings, Inc.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of the securities to be issued in connection with the merger or determined if this joint proxy statement/prospectus is accurate or complete. Any representation to the contrary is a criminal offense.

The enclosed joint proxy statement/prospectus is dated May 6, 2015, and is first being mailed or otherwise delivered to stockholders of Pacific Ethanol and Aventine on or about May 11, 2015.

Pacific Ethanol, Inc.
400 Capitol Mall, Suite 2060
Sacramento, CA 95814
(916) 403-2123

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 11, 2015

To the Stockholders of Pacific Ethanol, Inc.:

Pacific Ethanol, Inc.’s annual meeting of all stockholders will be held at the Sheraton Grand Sacramento, 1230 J Street, Sacramento, CA 95814 on June 11, 2015 at 9:00 a.m., local time, for the following purposes:

If you held shares of Pacific Ethanol common stock or Series B Preferred Stock at the close of business on April 23, 2015, you are entitled to notice of and to vote at the annual meeting and any adjournments or postponements thereof. If a new record date is set, you will be entitled to vote at the annual meeting if you held shares in Pacific Ethanol as of such record date.

The Pacific Ethanol Board unanimously recommends that you vote “FOR” all of these proposals, which are described in detail in the accompanying joint proxy statement/prospectus. Your attention is directed to the accompanying joint proxy statement/prospectus for a discussion of the merger and the merger agreement, as well as the other matters that will be considered at the meeting.

Your vote is very important. The conditions to the merger include that the Pacific Ethanol stockholders approve the issuance of the common stock and/or non-voting common stock, the charter amendment, and the agreement of the holders of Series B Preferred Stock not to treat the merger as a liquidation, dissolution or winding up within the meaning of Pacific Ethanol’s Certificate of Designations, Powers, Preferences and Rights relating to its Series B Preferred Stock. If you do not submit your proxy by telephone, the Internet, or return your signed proxy card(s) by mail or vote in person at the annual meeting, it will be more difficult for Pacific Ethanol to obtain the necessary quorum to hold its annual meeting. Holders of Pacific Ethanol Series B Preferred Stock will receive a separate proxy card, that varies slightly from the proxy card sent to holders of Pacific Ethanol common stock, which includes Proposal 3, a proposal to be voted on by holders of Pacific Ethanol Series B Preferred Stock only.

Whether or not you plan to attend the annual meeting in person, please complete, sign, date and return the enclosed proxy in the accompanying self-addressed postage pre-paid envelope or complete your proxy by following the instructions supplied on the proxy card for voting by telephone or via the Internet (or, if your shares are held in “street name” by a broker, nominee, fiduciary or other custodian, follow the directions given by the broker, nominee, fiduciary or other custodian regarding how to instruct it to vote your shares) as soon as possible. If you attend the annual meeting, you may withdraw your proxy and vote in person.

IMPORTANT NOTICE REGARDING THE INTERNET AVAILABILITY

OF PROXY MATERIALS FOR THE PACIFIC ETHANOL 2015 ANNUAL MEETING

OF STOCKHOLDERS TO BE HELD JUNE 11, 2015

This Joint Proxy Statement/Prospectus and Pacific Ethanol’s Annual Report on Form 10-K for the year ended December 31, 2014 are available at the following website address: www.proxyvote.com. You are encouraged to access and review all of the important information contained in the proxy materials before voting. The Pacific Ethanol Annual Report is not to be regarded as proxy soliciting material or as a communication through which any solicitation of proxies is made.

	By Order of the Board of Directors,
Sacramento, CA	William L. Jones
May 6, 2015	Chairman of the Board

PLEASE VOTE YOUR SHARES PROMPTLY. YOU CAN FIND INSTRUCTIONS FOR VOTING ON THE ENCLOSED PROXY CARD. IF YOU HAVE QUESTIONS ABOUT THE PROPOSALS OR ABOUT VOTING YOUR SHARES, PLEASE CALL PACIFIC ETHANOL’S PROXY SOLICITOR, GEORGESON INC., AT 1-888-565-5423.

Aventine Renewable Energy Holdings, Inc.
1300 South 2^nd Street
Pekin, IL 61554
(309) 347-9200

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 11, 2015

To the Stockholders of Aventine Renewable Energy Holdings, Inc.:

A special meeting of stockholders of Aventine Renewable Energy Holdings, Inc. will be held at the Offices of Akin Gump Strauss Hauer & Feld LLP, One Bryant Park, Bank of America Tower, New York, NY 10036-6745, on June 11, 2015 at 11:00 a.m., local time, for the following purposes:

If you held shares of Aventine common stock at the close of business on April 23, 2015, you are entitled to notice of and to vote at the special meeting and any adjournments or postponements thereof. If a new record date is set, you will be entitled to vote at the special meeting if you held shares in Aventine as of such record date.

The Aventine Board has unanimously approved the merger agreement, has determined that the merger agreement and the transactions contemplated thereby, including the merger, are advisable and in the best interests of Aventine and its stockholders, and unanimously recommends that Aventine stockholders vote “FOR” the Aventine merger proposal and “FOR” the Aventine adjournment proposal. It should be noted that in connection with the merger, the Aventine Board will receive indemnification for acts or omissions occurring prior to the effective time of the merger. The merger agreement also provides that, prior to the effective time of the merger, Aventine will purchase “tail” officers’ and directors’ liability insurance policies on terms and conditions reasonably comparable to Aventine’s existing directors’ and officers’ liability insurance. See, “Additional Interests of Certain of Aventine’s Directors and Executive Officers in the Merger” beginning on page 217 of the joint proxy statement/prospectus.

Your vote is very important. The conditions to the merger include that the Aventine stockholders approve the adoption of the merger agreement. If you do not return your signed proxy card(s) by mail or vote in person at your special meeting, it will be more difficult for Aventine to obtain the necessary quorum to hold its special meeting.

Whether or not you plan to attend the special meeting in person, please complete, sign, date and return the enclosed proxy in the accompanying self-addressed postage pre-paid envelope (or, if your shares are held in “street name” by a broker, nominee, fiduciary or other custodian, follow the directions given by the broker, nominee, fiduciary or other custodian regarding how to instruct it to vote your shares) as soon as possible. If you attend the special meeting, you may withdraw your proxy and vote in person.

	By Order of the Board of Directors,
Pekin, IL	Mark Beemer
May 6, 2015	Chief Executive Officer

PLEASE VOTE YOUR SHARES PROMPTLY. YOU CAN FIND INSTRUCTIONS FOR VOTING ON THE ENCLOSED PROXY CARD. IF YOU HAVE QUESTIONS ABOUT THE PROPOSALS OR ABOUT VOTING YOUR SHARES, PLEASE CALL AVENTINE’S CORPORATE SECRETARY, CHRISTOPHER A. NICHOLS AT 1-800-384-2665 (TOLL FREE) OR VIA EMAIL AT CHRIS.NICHOLS@AVENTINEREI.COM.

ADDITIONAL INFORMATION

This joint proxy statement/prospectus incorporates important business and financial information about Pacific Ethanol that is not included in or being delivered with this joint proxy statement/prospectus. The incorporated information that is not included in or being delivered with this joint proxy statement/prospectus is available to you without charge upon your written or oral request. You can obtain any document that is incorporated by reference in this joint proxy statement/prospectus, excluding all exhibits that have not been specifically incorporated by reference, on the investor relations page of Pacific Ethanol’s website at www.pacificethanol.com or by requesting it in writing or by telephone from Pacific Ethanol at the following address or telephone number:

400 Capitol Mall, Suite 2060
Sacramento, CA 95814
(916) 403-2123
Attn.: Corporate Secretary
Website: www.pacificethanol.com

To obtain timely delivery, you must request the information no later than five business days before June 11, 2015. If you would like to request any documents, please do so by June 4, 2015 in order to receive them before Pacific Ethanol’s annual meeting. See “Where You Can Find More Information.”

You should rely only on the information contained in, or incorporated by reference into, this document. No one has been authorized to provide you with information that is different from that contained in, or incorporated by reference into, this document. This document is dated May 6, 2015, and you should assume that the information in this document is accurate only as of such date. You should assume that the information incorporated by reference into this document is accurate as of the date of such document. Neither the mailing of this document to Aventine stockholders nor the issuance by Pacific Ethanol of shares of Pacific Ethanol common stock and/or non-voting common stock in connection with the merger will create any implication to the contrary.

IMPORTANT NOTICE REGARDING THE INTERNET AVAILABILITY

OF PROXY MATERIALS FOR THE PACIFIC ETHANOL 2015 ANNUAL MEETING

OF STOCKHOLDERS TO BE HELD JUNE 11, 2015

This Joint Proxy Statement/Prospectus and Pacific Ethanol’s Annual Report on Form 10-K for the year ended December 31, 2014 are available at the following website address: www.proxyvote.com. You are encouraged to access and review all of the important information contained in the proxy materials before voting. The Pacific Ethanol Annual Report is not to be regarded as proxy soliciting material or as a communication through which any solicitation of proxies is made.

This document does not constitute an offer to sell, or a solicitation of an offer to buy, any securities, or the solicitation of a proxy, in any jurisdiction to or from any person to whom it is unlawful to make any such offer or solicitation in such jurisdiction. Except where the context otherwise indicates, information contained in this document regarding Aventine has been provided by Aventine and information contained in this document regarding Pacific Ethanol has been provided by Pacific Ethanol.

TABLE OF CONTENTS

TABLE OF CONTENTS

(continued)

TABLE OF CONTENTS

(continued)

TABLE OF CONTENTS

(continued)

TABLE OF CONTENTS

(continued)

QUESTIONS AND ANSWERS ABOUT THIS JOINT PROXY STATEMENT/PROSPECTUS

The following are some questions that you, as a stockholder of Pacific Ethanol and/or Aventine, may have regarding this joint proxy statement/prospectus, the Pacific Ethanol annual meeting of stockholders and the Aventine special meeting of stockholders, together with brief answers to those questions. Pacific Ethanol and Aventine urge you carefully read this joint proxy statement/prospectus in its entirety, including the annexes and other documents attached and/or referred to in this joint proxy statement/prospectus, because the information in this section does not provide all of the information that will be important to you with respect to the Pacific Ethanol annual meeting of stockholders and/or the Aventine special meeting of stockholders.

Q: Why am I receiving this document?

A: This document is being delivered to you because you are either a stockholder of Pacific Ethanol, Inc. (sometimes referred to as Pacific Ethanol), a stockholder of Aventine Renewable Energy Holdings, Inc. (sometimes referred to as Aventine), or both. Pacific Ethanol and Aventine are delivering these proxy materials to you because each of the Pacific Ethanol Board and the Aventine Board is soliciting your proxy to vote at Pacific Ethanol’s annual meeting of stockholders or Aventine’s special meeting of stockholders, as applicable, and at any adjournment or postponement thereof.

In connection with the proposed acquisition of Aventine by Pacific Ethanol through a merger, holders of Pacific Ethanol common stock and Series B Cumulative Redeemable Convertible Preferred Stock (sometimes referred to as Series B Preferred Stock), voting together as a single class, are being asked to approve at the annual meeting: (i) a proposal to approve the issuance of Pacific Ethanol common stock and non-voting common stock as contemplated by the Agreement and Plan of Merger, dated as of December 30, 2014, as amended on March 31, 2015 (sometimes referred to as the merger agreement), by and among Pacific Ethanol, AVR Merger Sub, Inc. (sometimes referred to as Merger Sub) and Aventine, (ii) a proposal to amend Pacific Ethanol’s Certificate of Incorporation to authorize a class of non-voting common stock as contemplated by the merger agreement, and (iii) a proposal to adjourn Pacific Ethanol’s annual meeting if necessary or advisable to permit further solicitation of proxies in the event there are not sufficient votes at the time of the annual meeting to approve the above matters. In connection with the merger, holders of Pacific Ethanol Series B Preferred Stock, voting as a separate class, are being asked to approve at the annual meeting: (x) a proposal to approve the issuance of Pacific Ethanol common stock and non-voting common stock as contemplated by the merger agreement, (y) a proposal to amend Pacific Ethanol’s Certificate of Incorporation to authorize a class of non-voting common stock as contemplated by the merger agreement, and (z) the agreement by the holders of Pacific Ethanol Series B Preferred Stock not to treat the merger as a liquidation, dissolution or winding up within the meaning of Pacific Ethanol’s Certificate of Designations, Powers, Preferences and Rights relating to its Series B Preferred Stock (sometimes referred to as the Pacific Ethanol Series B Certificate of Designations).

In addition, holders of Pacific Ethanol common stock and Series B Preferred Stock, voting together as a single class, are being asked, at the annual meeting, to: (i) elect seven directors; (ii) cast an advisory vote to approve Pacific Ethanol’s executive compensation; and (iii) ratify the appointment of Hein & Associates LLP to serve as Pacific Ethanol’s independent registered public accounting firm for the year ending December 31, 2015.

Aventine stockholders are being asked to adopt at a special meeting the merger agreement, and thereby approve the merger; and a proposal to adjourn the special meeting if necessary or advisable to permit further solicitation of proxies in the event there are not sufficient votes at the time of the special meeting to adopt the merger agreement and approve the merger.

This document is serving as both a joint proxy statement of Pacific Ethanol and Aventine and a prospectus of Pacific Ethanol. It is a joint proxy statement because it is being used by each of the Pacific Ethanol Board and Aventine Board to solicit proxies from their respective stockholders with respect to the meetings. It is a prospectus because Pacific Ethanol is offering shares of its common stock and non-voting common stock in exchange for shares of Aventine common stock if the merger is completed. A copy of the merger agreement is attached as Annex A to this joint proxy statement/prospectus.

Q: Who is entitled to vote at Pacific Ethanol’s annual meeting?

A: All holders of Pacific Ethanol common stock and Series B Preferred Stock, who held shares at the record date for the Pacific Ethanol annual meeting (the close of business on April 23, 2015) are entitled to receive notice of, and to vote at, the Pacific Ethanol annual meeting provided that those shares remain outstanding on the date of the Pacific Ethanol annual meeting. As of the close of business on April 23, 2015, there were 24,658,394 shares of Pacific Ethanol common stock issued and outstanding and 926,942 shares of Pacific Ethanol Series B Preferred Stock issued and outstanding. Each holder of Pacific Ethanol outstanding common stock is entitled to one vote for each share of Pacific Ethanol common stock owned at the record date. When voting on matters with holders of Pacific Ethanol common stock together as a single class, each holder of Pacific Ethanol Series B Preferred Stock is entitled to approximately 0.03 votes per share held (sometimes referred to as the Preferred Voting Ratio). As a result, a total of 24,684,878 votes may be cast at the annual meeting, of which holders of Pacific Ethanol common stock will be entitled to cast 24,658,394 votes and holders of Pacific Ethanol Series B Preferred Stock will be entitled to cast 26,484 votes. When voting as a separate class, each holder of Pacific Ethanol Series B Preferred Stock is entitled to one vote for each share of Pacific Ethanol Series B Preferred Stock owned at the record date.

Q: Who is entitled to vote at the Aventine special meeting?

A: All holders of Aventine common stock who held shares at the record date for the Aventine special meeting (the close of business on April 23, 2015) are entitled to receive notice of, and to vote at, the Aventine special meeting provided that those shares remain outstanding on the date of the Aventine special meeting. As of the close of business on April 23, 2015, there were 14,204,240 shares of Aventine common stock issued and outstanding. Each holder of Aventine common stock is entitled to one vote for each share of Aventine common stock owned at the record date.

Q: What constitutes a quorum for the Pacific Ethanol annual meeting?

A: A quorum is the number of shares that must be represented at a meeting to lawfully conduct business. The presence at the annual meeting, in person or by proxy, of the holders of a majority of the shares of Pacific Ethanol common stock and Series B Preferred Stock (giving effect to the Preferred Voting Ratio) issued and outstanding and entitled to vote at the annual meeting constitutes a quorum for the transaction of business. Abstentions and broker non-votes, if any, will be included in the calculation of the number of shares considered to be present at the Pacific Ethanol annual meeting for purposes of determining a quorum.

Q: What constitutes a quorum for the Aventine special meeting?

A: A quorum is the number of shares that must be represented at a meeting to lawfully conduct business. The presence at the special meeting, in person or by proxy, of the holders of a majority of the shares of Aventine common stock issued and outstanding and entitled to vote at the special meeting constitutes a quorum for the transaction of business. Abstentions and broker non-votes, if any, will be included in the calculation of the number of shares considered to be present at the meeting for quorum purposes.

Q: How will my proxy be voted?

A: If you are a Pacific Ethanol stockholder and you submit your proxy by telephone, by the Internet or by completing, signing, dating and returning your signed proxy card(s), your proxy will be voted in accordance with your instructions. If you are an Aventine stockholder and you complete, sign, date and return your signed proxy card(s), your proxy will be voted in accordance with your instructions. If other matters are properly brought before the stockholders meetings, or any adjournments of the meetings, your proxy includes discretionary authority on the part of the individuals appointed to vote your shares to act on those matters according to their best judgment.

Q: May I vote in person?

A: Yes. If you hold shares directly in your name as a stockholder of record of Pacific Ethanol stock as of the close of business on April 23, 2015, or of Aventine common stock as of the close of business on April 23, 2015, you may attend your annual or special meeting, as applicable, and vote your shares in person, instead of submitting your proxy by telephone, by the Internet or returning your signed proxy card(s) by mail, as applicable. If you hold shares of Pacific Ethanol common stock or Aventine common stock in “street name,” meaning through a broker, nominee, fiduciary or other custodian, you must obtain a legal proxy from that institution and present it to the inspector of election with your ballot to be able to vote in person at the Pacific Ethanol annual meeting or Aventine special meeting, as applicable. To request a legal proxy, please contact your broker, nominee, fiduciary or other custodian. Pacific Ethanol and Aventine highly recommend that you vote in advance by submitting your proxy by telephone, by the Internet or by mail, as applicable, even if you plan to attend the stockholders meeting of your company.

Q: What are the voting requirements to approve each of the proposals that will be voted on at the Pacific Ethanol annual meeting?

A:

Q: What are the voting requirements to approve each of the proposals that will be voted on at the Aventine special meeting?

A:

Q: Does Pacific Ethanol’s board of directors recommend that Pacific Ethanol stockholders approve the proposals regarding the merger including the issuance of shares of Pacific Ethanol common stock and non-voting common stock, the amendment of Pacific Ethanol’s Certificate of Incorporation and the treatment of the merger not as a liquidation, dissolution or winding up within the meaning of the Pacific Ethanol Series B Certificate of Designations?

A: Yes. The board of directors of Pacific Ethanol (sometimes referred to as the Pacific Ethanol Board) has unanimously approved the merger agreement and the transactions contemplated thereby, including the merger, and determined that the issuance of shares of Pacific Ethanol common stock and non-voting common stock and the Certificate of Amendment of Pacific Ethanol’s Certificate of Incorporation as contemplated by the merger agreement is in the best interests of Pacific Ethanol. Therefore, the Pacific Ethanol Board unanimously recommends that you vote “FOR” the proposal respecting the issuance of shares of Pacific Ethanol common stock and non-voting common stock as contemplated by the merger agreement at the Pacific Ethanol annual meeting, that you vote “FOR” the proposal respecting the Certificate of Amendment of Pacific Ethanol’s Certificate of Incorporation and that you vote “FOR” the proposal not to treat the merger as a liquidation, dissolution or winding up within the meaning of the Pacific Ethanol Series B Certificate of Designations. See “The Proposed Merger—Recommendation of the Pacific Ethanol Board and its Reasons for the Merger” beginning on page 176 of this joint proxy statement/prospectus.

Q: Does the Pacific Ethanol Board recommend that Pacific Ethanol stockholders approve the other proposals not related to the merger set forth in this joint proxy statement/prospectus?

A: Yes. The Pacific Ethanol Board unanimously recommends that you vote “FOR” each of the nominees to the Pacific Ethanol Board, “FOR” the approval of Pacific Ethanol’s executive compensation (“say-on-pay”) and “FOR” the ratification of the appointment of Hein & Associates LLP as Pacific Ethanol’s independent registered public accounting firm for 2015.

Q: Does Aventine’s board of directors recommend that Aventine stockholders adopt the merger agreement and the transactions contemplated thereby?

A: Yes. The board of directors of Aventine (sometimes referred to as the Aventine Board) has unanimously approved the merger agreement and the transactions contemplated thereby, including the merger, and determined that these transactions are advisable and in the best interests of Aventine and its stockholders. Therefore, the Aventine Board unanimously recommends that you vote “FOR” the proposal to adopt the merger agreement and the transactions contemplated thereby at the Aventine special meeting. See “The Proposed Merger—Recommendation of the Aventine Board and its Reasons for the Merger” beginning on page 188 of this joint proxy statement/prospectus. In considering the recommendation of the board of directors of Aventine with respect to the merger agreement and the transactions contemplated thereby, including the merger, you should be aware that certain directors and executive officers of Aventine are parties to agreements or are participants in other arrangements that give them interests that may be different from, or in addition to, your interests as a stockholder of Aventine. It should be noted that in connection with the merger, the Aventine Board will receive indemnification for acts or omissions occurring prior to the effective time of the merger. The merger agreement also provides that, prior to the effective time of the merger, Aventine will purchase “tail” officers’ and directors’ liability insurance policies on terms and conditions reasonably comparable to Aventine’s existing directors’ and officers’ liability insurance. Although the Aventine Board has the interests described above, no member of the Aventine Board has any equity interest or equivalent in Aventine capital stock. You should consider these interests in voting on this proposal. These different interests are described under “Additional Interests of Certain of Aventine’s Directors and Executive Officers in the Merger” beginning on page 205 of this joint proxy statement/prospectus.

Q: What if my shares are held in “street name”?

A: If some or all of your shares of Pacific Ethanol and/or Aventine are held in “street name” by your broker, nominee, fiduciary or other custodian, you must provide your broker, nominee, fiduciary or other custodian with instructions on how to vote your shares; otherwise, your broker, nominee, fiduciary or other custodian will not be able to vote your shares on some of the proposals before your company’s stockholders meeting.

As a result of the foregoing, please be sure to provide your broker, nominee, fiduciary or other custodian with instructions on how to vote your shares. Please check the voting form used by your broker, nominee, fiduciary or other custodian to see if it offers telephone or Internet submission of proxies.

Q: What are abstentions and broker non-votes?

An “abstention” is the voluntary act of not voting by a stockholder who is present at a meeting in person or by proxy and entitled to vote. “Broker non-votes” refers to shares held by a brokerage firm or other nominee (for the benefit of its client) that are represented at the meeting, but with respect to which such broker or nominee is not instructed to vote on a particular proposal and does not have discretionary authority to vote on that proposal.

If you are a beneficial owner whose shares are held in street name and you do not submit voting instructions to your broker, your broker may generally vote your shares in its discretion on routine matters. We believe that Pacific Ethanol’s Proposal 7 is routine and may be voted on by your broker if you do not submit voting instructions. However, pursuant to rules of The NASDAQ Stock Market (sometimes referred to as NASDAQ), brokers do not have the discretion to vote their clients’ shares on non-routine matters, unless the broker receives voting instructions from the beneficial owner. Pacific Ethanol’s Proposals 1 through 6 and Aventine’s Proposals 1 and 2 are considered non-routine matters. Consequently, if your shares are held in street name, you must provide your broker with instructions on how to vote your shares in order for your shares to be voted on Pacific Ethanol’s Proposals 1 through 6 or Aventine’s Proposals 1 and 2.

Brokers may not vote your shares on the election of directors or other non-routine matters in the absence of your specific instructions as to how to vote, thus we strongly encourage you to provide instructions to your broker regarding the voting of your shares you hold in “street name” or through a broker or other nominee.

Q: If I am a record holder of my shares, what happens if I abstain from voting (whether by returning my proxy card or submitting my proxy by telephone or via the Internet) or I don’t submit a proxy?

A: Pacific Ethanol.

Aventine.

Q: What will happen if I return my proxy card without indicating how to vote?

A: If you are a Pacific Ethanol stockholder of record and submit your proxy but do not make specific choices, your proxy will follow the Pacific Ethanol Board’s recommendations and your shares will be voted “FOR” the proposal to approve the issuance of shares of Pacific Ethanol common stock and non-voting common stock as contemplated by the merger agreement; “FOR” the proposal to approve the Certificate of Amendment of Pacific Ethanol’s Certificate of Incorporation as contemplated by the merger agreement; if you are holder of Pacific Ethanol Series B Preferred Stock, “FOR” the proposal to not treat the merger as a liquidation, dissolution or winding up within the meaning of the Pacific Ethanol Series B Certificate of Designations; “FOR” the proposal to adjourn the annual meeting if necessary or advisable to permit further solicitation of proxies in the event there are not sufficient votes at the time of the annual meeting to approve the above matters; “FOR” each of the nominees to the Pacific Ethanol Board; “FOR” the approval of Pacific Ethanol’s executive compensation (“say-on-pay”); and “FOR” the ratification of the appointment of Hein & Associates LLP as Pacific Ethanol’s independent registered public accounting firm for 2015.

If you are an Aventine stockholder of record and submit your proxy but do not make specific choices with respect to the proposals, your proxy will follow the Aventine Board’s recommendations and your shares will be voted “FOR” the proposal to adopt the merger agreement (under such circumstances, your proxy will constitute a waiver of your right of appraisal under Section 262 of the of the General Corporation Law of the State of Delaware (sometimes referred to as Section 262) and will nullify any previously delivered written demand for appraisal under Section 262), and “FOR” the proposal to adjourn the special meeting if necessary or advisable to permit further solicitation of proxies in the event there are not sufficient votes at the time of the special meeting to adopt the merger agreement and approve the merger.

Q: What happens if I sell my shares after the record date but before the stockholders meeting?

A: The record date for the Pacific Ethanol annual meeting (the close of business on April 23, 2015) is earlier than the date of the Pacific Ethanol annual meeting and earlier than the date that the merger is expected to be completed. If you sell or otherwise transfer shares of Pacific Ethanol stock after the record date but before the date of the Pacific Ethanol annual meeting, you will retain your right to vote those shares at the Pacific Ethanol annual meeting.

The record date for the Aventine special meeting (the close of business on April 23, 2015) is earlier than the date of the Aventine special meeting and earlier than the date that the merger is expected to be completed. If you sell or otherwise transfer shares of Aventine common stock after the record date but before the date of the Aventine special meeting, you will retain your right to vote those shares at the Aventine special meeting. However, you will not have the right to receive the merger consideration in respect of those shares. In order to receive the merger consideration, you must hold your shares through completion of the merger.

Q: What does it mean if I receive more than one set of materials?

A: This means you own shares of both Pacific Ethanol and Aventine, or you own shares of Pacific Ethanol common stock and Series B Preferred Stock, or you own shares of Pacific Ethanol or Aventine that are registered under different names or held in different brokerage accounts. For example, you may own some shares directly as a stockholder of record and other shares through a broker or you may own shares through more than one broker. In these situations, you may receive multiple sets of proxy materials. It is necessary for you to vote, sign and return all of the proxy cards or follow the instructions for any alternative voting procedure on each of the proxy cards you receive in order to vote all of the shares you own. Each proxy card you receive will come with its own prepaid return envelope; if you submit your proxy by mail; make sure you return each proxy card in the return envelope which accompanied that proxy card.

Q: Can I revoke my proxy and change my vote?

A: Yes. You have the right to revoke your proxy at any time prior to the time your shares are voted at your stockholders meeting. If you are a stockholder of record, your proxy can be revoked in several ways:

However, if your shares are held in “street name” through a broker, nominee, fiduciary or other custodian, you must check with your broker, nominee, fiduciary or other custodian to determine how to revoke your proxy.

Q: When and where are the stockholders meetings?

A: The Pacific Ethanol annual meeting will take place on June 11, 2015, at 9:00 a.m., local time, at the Sheraton Grand Sacramento, 1230 J Street, Sacramento, CA 95814. The Aventine special meeting will take place on June 11, 2015, at 11:00 a.m., local time, at the Offices of Akin Gump Strauss Hauer & Feld LLP, One Bryant Park, Bank of America Tower, New York, NY 10036-6745.

Q: Who can attend the stockholders meetings? What must I bring to attend the stockholders meetings?

A: Admittance to the Pacific Ethanol annual meeting will require a valid photo identification, such as a driver’s license or passport. Attendance at the meeting will be limited to stockholders of record as of the record date and one guest per stockholder. Stockholders whose shares are held in “street name” by a broker, nominee, fiduciary or other custodian should bring with them a copy of a brokerage statement reflecting stock ownership as of the record date, together with a valid photo identification. If you want to vote your shares of Pacific Ethanol common stock held in “street name” in person at the Pacific Ethanol annual meeting, you will have to obtain a legal proxy in your name from the broker, nominee, fiduciary or other custodian who holds your shares.

Admittance to the Aventine special meeting will require a valid photo identification, such as a driver’s license or passport. Attendance at the meeting will be limited to stockholders of record as of the record date. Stockholders whose shares are held in “street name” by a broker, nominee, fiduciary or other custodian should bring with them a copy of a brokerage statement reflecting stock ownership as of the record date, together with a valid photo identification. If you want to vote your shares of Aventine common stock held in “street name” in person at the Aventine special meeting, you will have to obtain a legal proxy in your name from the broker, nominee, fiduciary or other custodian who holds your shares.

Q: Who can answer any questions I may have about the stockholders meetings?

A: Pacific Ethanol stockholders may call Georgeson Inc., Pacific Ethanol’s proxy solicitors for the annual meeting, toll-free at 1-888-565-5423. Aventine stockholders may call Aventine’s Corporate Secretary, Christopher A. Nichols at 1-800-384-2665 toll-free or email chris.nichols@aventinerei.com.

QUESTIONS AND ANSWERS ABOUT THE MERGER

The following are some questions that you, as a stockholder of Pacific Ethanol and/or Aventine, may have regarding the merger, together with brief answers to those questions. Pacific Ethanol and Aventine urge you carefully read this joint proxy statement/prospectus in its entirety, including the annexes and other documents attached and/or referred to in this joint proxy statement/prospectus, because the information in this section does not provide all of the information that will be important to you with respect to the merger.

Q: What will happen in the merger?

A: In the merger, Merger Sub will merge with and into Aventine. Aventine will be the surviving entity in the merger as a wholly-owned subsidiary of Pacific Ethanol. Thus, Pacific Ethanol will acquire Aventine through the merger.

Q: What will Aventine stockholders receive in the merger for their shares?

A: When the merger is completed, each share of Aventine common stock issued and outstanding immediately prior to the merger (other than dissenting shares and shares held by Pacific Ethanol or Aventine) will be converted automatically into the right to receive (i) 1.25 shares of Pacific Ethanol common stock, (ii) 1.25 shares of Pacific Ethanol non-voting common stock, or (iii) a combination of the two, resulting in the Aventine stockholder receiving a total number of shares of common stock and non-voting common stock equal to 1.25 times the number of shares of Aventine common stock held by such stockholder, subject to certain limitations to maintain the tax free treatment of the merger. Specifically, no more than 20% of the shares of Aventine common stock will be exchanged by the stockholders for shares of Pacific Ethanol non-voting common stock. Shares of Pacific Ethanol non-voting common stock are the same in all respects to shares of Pacific Ethanol’s common stock except that holders of shares of non-voting common stock are not entitled to vote on matters submitted to Pacific Ethanol stockholders and shares of non-voting common stock are convertible into shares of common stock on a one-for-one basis no earlier than sixty-one days after such holder provides a notice of conversion to Pacific Ethanol.

The stockholders of Pacific Ethanol will continue to own their existing shares and the rights and privileges of their existing shares will not be affected by the merger. However, because Pacific Ethanol will be issuing new shares of Pacific Ethanol common stock and non-voting common stock to Aventine stockholders in the merger, the stockholders of Pacific Ethanol will experience dilution as a result of the issuance of shares in the merger and each outstanding share of Pacific Ethanol common stock immediately prior to the merger will represent a smaller percentage of the total number of shares of Pacific Ethanol common stock and non-voting common stock issued and outstanding after the merger. It is expected that Pacific Ethanol stockholders before the merger will hold approximately 58% of the total Pacific Ethanol common stock and non-voting common stock issued and outstanding immediately following completion of the merger. Thus, Pacific Ethanol stockholders before the merger will experience dilution in the amount of 42% as a result of the merger.

The exchange ratio to be used in connection with the merger is fixed and will not be adjusted to reflect changes in the price of Pacific Ethanol or Aventine common stock prior to the closing of the merger.

Q: Will any fractional shares be issued in connection with the merger?

A: No fractional shares of Pacific Ethanol common stock or non-voting common stock will be issued. Holders of Aventine common stock to whom fractional shares would have otherwise been issued will be entitled to receive, subject to applicable withholding, a cash payment in lieu of such fraction based on the volume-weighted average price per share of Pacific Ethanol common stock over the five trading day period immediately preceding the effective time of the merger. See “Risk Factors” beginning on page 37 of this joint proxy statement/prospectus.

Q: When must an Aventine stockholder elect the type of merger consideration that such stockholder would prefer to receive?

A: If you are an Aventine stockholder and wish to elect the type of merger consideration you receive in the merger, you should carefully review and follow the instructions set forth in the election form, which is being separately mailed to Aventine stockholders following the mailing of this proxy statement/prospectus (sometimes referred to as the election form). The election form will be mailed no more than 40 business days and no less than 20 business days prior to the anticipated consummation of the merger. Election forms will be mailed to each holder of record of Aventine common stock as of five business days prior to the mailing date of the election form. You will need to sign, date and complete the election form and transmittal materials and return them, along with your Aventine stock certificates (or customary affidavits and indemnification regarding the loss or destruction of such certificates or the guaranteed delivery of such certificates), to an exchange agent appointed by Pacific Ethanol (sometimes referred to as the exchange agent), at the address and pursuant to the instructions given in the materials. The election deadline is 5:00 p.m. Pacific Time on the 20th day following the mailing date of the election form. If you do not submit a properly completed and signed election form to the exchange agent by the election deadline, you will not have the option to select the type of merger consideration you may receive, and consequently, you will only receive shares of Pacific Ethanol common stock. If you hold shares in “street name,” you will have to follow your broker’s instructions to make an election.

Q: What do I need to do now?

A: After you carefully read this joint proxy statement/prospectus, please respond by completing, signing, dating and returning your signed proxy card(s) in the enclosed prepaid return envelope(s), or, for Pacific Ethanol stockholders only, by submitting your proxy by telephone or by the Internet, as soon as possible, so that your shares may be represented at your stockholders meeting. If you hold your shares in “street name” through a broker, nominee, fiduciary or other custodian, follow the directions given by the broker, nominee, fiduciary or other custodian regarding how to instruct them to vote your shares. In order to ensure that your vote is recorded, please submit your proxy as instructed on your proxy card(s) even if you currently plan to attend your stockholders meeting in person.

Q: Why is my vote important?

A: If you do not submit your proxy by returning your signed proxy card(s) by mail, voting in person at your stockholders meeting, or, for Pacific Ethanol stockholders only, by submitting your proxy by telephone or by the Internet, it will be more difficult for Pacific Ethanol and Aventine to obtain the necessary quorum to hold their respective annual and special meeting and to obtain the stockholder approvals necessary for the completion of the merger. If a quorum is not present at the Pacific Ethanol annual meeting or the Aventine special meeting, the stockholders of that company will not be able to take action on any of the proposals at that meeting.

While a failure to submit a proxy or vote in person at the stockholders meeting, or a failure to provide your broker, nominee, fiduciary or other custodian, as applicable, with instructions on how to vote your shares will not affect the outcome of the vote on the proposal to approve the issuance of shares of Pacific Ethanol common stock and non-voting common stock (Proposal 1), a failure to submit a proxy or vote in person at the annual meeting will make it more difficult to meet the requirement under Pacific Ethanol’s bylaws that the holders of a majority of the shares of Pacific Ethanol common stock and Series B Preferred Stock (giving effect to the Preferred Voting Ratio) and entitled to vote at the annual meeting be present in person or by proxy to constitute a quorum at the annual meeting, except that a majority of the shares of outstanding Series B Preferred Stock, voting as a separate class and entitled to vote, must also approve Proposal 1 and thus if you are a Series B Preferred Stock stockholder, a failure to submit a proxy or vote in person on the annual meeting, or a failure to provide your broker, nominee, fiduciary or other custodian as applicable with instructions on how to vote your shares will have the same effect as a vote “AGAINST” the proposal for the purposes of the separate class vote of the Series B Preferred Stock.

For the proposal to amend Pacific Ethanol’s Certificate of Incorporation (Proposal 2), (i) a majority of the outstanding shares of Pacific Ethanol common stock and Series B Preferred Stock (giving effect to the Preferred Voting Ratio) entitled to vote on such matter and (ii) a majority of the outstanding shares of Series B Preferred Stock, voting as a separate class and entitled to vote, must approve such proposal; thus an abstention from voting, a failure to submit a proxy or vote in person at the annual meeting, or a failure to provide your broker, nominee, fiduciary or other custodian, as applicable, with instructions on how to vote your shares will have the same effect as a vote “AGAINST” the proposal.

For the proposal to be voted on by holders of Pacific Ethanol Series B Preferred Stock to not treat the merger as a liquidation, dissolution or winding up within the meaning of the Pacific Ethanol Series B Certificate of Designations (Proposal 3), holders of 66-2/3% of the outstanding shares of Series B Preferred Stock must approve such proposal; thus an abstention from voting, a failure to submit the proxy card being sent separately to holders of Pacific Ethanol Series B Preferred Stock or vote in person at the annual meeting will have the same effect as a vote “AGAINST” the proposal.

For the Aventine stockholders to adopt the merger agreement and approve the merger, a majority of the outstanding shares of common stock entitled to vote on such matter must approve such proposal; thus an abstention from voting, a failure to submit a proxy or vote in person at the special meeting, or a failure to provide your broker, nominee, fiduciary or other custodian, as applicable, with instructions on how to vote your shares could have the same effect as a vote “AGAINST” the proposal.

Your vote is very important. Pacific Ethanol and Aventine cannot complete the merger unless (i) holders of Pacific Ethanol common stock and Series B Preferred Stock approve the share issuance, voting together as a single class (giving effect to the Preferred Voting Ratio) (ii) holders of Pacific Ethanol Series B Preferred Stock approve the share issuance, voting as a separate class, (iii) holders of Pacific Ethanol common stock and Series B Preferred Stock approve the amendment to Pacific Ethanol’s Certificate of Incorporation, voting together as a single class (giving effect to the Preferred Voting Ratio), (iv) holders of Pacific Ethanol Series B Preferred Stock approve the amendment to Pacific Ethanol’s Certificate of Incorporation, voting as a separate class, (v) holders of Pacific Ethanol Series B Preferred Stock agree not to treat the merger as a liquidation, dissolution or winding up within the meaning of the Pacific Ethanol Series B Certificate of Designations, voting as a separate class, and (vi) Aventine stockholders adopt the merger agreement and approve the merger.

Q: Why have Pacific Ethanol and Aventine agreed to the merger?

A: The board of directors and management team of each of Pacific Ethanol and Aventine believe the merger to provide substantial strategic and financial benefits to their stockholders, customers and other stakeholders, including, among others:

Additional information on the reasons for the merger can be found below, beginning on page 176 of this joint proxy statement/prospectus for Pacific Ethanol and beginning on page 188 of this joint proxy statement/prospectus for Aventine.

Q: Why is Pacific Ethanol asking to amend its Certificate of Incorporation to create a class of non-voting common stock?

A: Approval of an amendment to Pacific Ethanol’s Certificate of Incorporation to create a class of non-voting common stock (which is the subject of Pacific Ethanol Proposal No. 2) is one of the conditions to the consummation of the merger. Pacific Ethanol non-voting common stock is a type of merger consideration Aventine stockholders may elect; thus, Pacific Ethanol must amend its Certificate of Incorporation to create this class of non-voting common stock. Shares of Pacific Ethanol non-voting common stock are the same in all respects to shares of Pacific Ethanol’s common stock except that holders of shares of non-voting common stock are not entitled to vote on matters submitted to Pacific Ethanol stockholders and shares of non-voting common stock are convertible into shares of common stock on a one-for-one basis no earlier than sixty-one days after such holder provides a notice of conversion to Pacific Ethanol.

The inclusion of the option to receive non-voting common stock in exchange for Aventine common stock is an accommodation to the seven Candlewood Investment Group, LP (sometimes referred to as Candlewood) affiliates (collectively, Aventine’s majority stockholder) that are party to the stockholders agreements who have expressed a desire to receive equity consideration that would not require compliance with the continuing disclosure obligations arising out of the reporting requirements under Sections 13(d) and 13(g) of the Securities Exchange Act of 1934, as amended (sometimes referred to as the Exchange Act) with respect to the Pacific Ethanol common stock.

Q: When do you expect the merger to be completed?

A: Pacific Ethanol and Aventine hope to complete the merger as soon as reasonably practicable, subject to receipt of stockholder approvals, which are proposals presented at the Pacific Ethanol annual meeting and the Aventine special meeting, and necessary regulatory approvals. Pacific Ethanol and Aventine currently expect that the transaction will be completed in the second quarter of 2015. However, Pacific Ethanol and Aventine cannot predict when regulatory review will be completed, whether or when regulatory or stockholder approval will be received or the potential terms and conditions of any regulatory approval that is received. In addition, certain other conditions to the merger, some of which are outside of the control of Pacific Ethanol and Aventine, may not be satisfied until later in 2015 or at all. For a discussion of the conditions to the completion of the merger and of the risks associated with obtaining regulatory approvals in connection with the merger, see “The Merger Agreement and Related Agreements—Conditions to Completion of the Merger” beginning on page 222 of this joint proxy statement/prospectus and “The Proposed Merger—Regulatory Matters Relating to the Merger” beginning on page 201 of this joint proxy statement/prospectus.

Q: Will the merger be taxable to stockholders of Aventine?

A: Each of Pacific Ethanol and Aventine has received an opinion from its legal counsel to the effect that the merger will qualify as a “reorganization” for United States federal income tax purposes within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended (sometimes referred to as the Code), and that each of Pacific Ethanol and Aventine will be a party to the “reorganization.” Assuming the merger does qualify as a reorganization, Aventine stockholders generally will not recognize gain or loss for United States federal income tax purposes upon the receipt of Pacific Ethanol common stock and/or non-voting common stock in the merger, except that an Aventine stockholder will recognize gain or loss with respect to any cash received in lieu of a fractional share of Pacific Ethanol common stock and/or non-voting common stock, and except to the extent that any payment by Aventine of transfer taxes is treated as taxable consideration received by Aventine stockholders. Aventine stockholders who exercise their appraisal rights will recognize gain or loss with respect to cash received in exchange for Aventine common stock. In order to maintain the tax free treatment of the merger, Pacific Ethanol is limited in the amount of Pacific Ethanol non-voting common stock that may be issued to Aventine common stockholders as merger consideration. Specifically, no more than 20% of the shares of Aventine common stock will be exchanged by the Aventine stockholders for shares of Pacific Ethanol non-voting common stock.

Aventine stockholders are urged to read the discussion in the section entitled “The Proposed Merger—Material United States Federal Income Tax Consequences of the Merger” beginning on page 197 of this joint proxy statement/prospectus and to consult their tax advisors as to the United States federal income tax consequences of the transaction, as well as the effects of state, local and non-United States tax laws.

Q: Will there be any changes to the Pacific Ethanol Board if the merger becomes effective?

A: Yes. The merger agreement provides that the holders of a majority of shares of Aventine common stock will be entitled to nominate two individuals to the Pacific Ethanol Board. Pacific Ethanol currently has seven directors. After the merger, the number of directors will be increased to nine. As of the date of this joint proxy statement/prospectus, the nominees have not been identified. For more information, please see the section entitled “Summary—Directors and Executive Management of Pacific Ethanol Following the Merger” beginning on page 21 of this joint proxy statement/prospectus.

Q: Are there any Pacific Ethanol or Aventine stockholders already committed to vote in favor of the merger-related proposals? 

A: Yes. Pacific Ethanol has entered into stockholders agreements with eight significant stockholders of Aventine (seven of whom are affiliated with Candlewood) pursuant to which each such significant stockholder has agreed to vote a portion of the number of shares of Aventine common stock beneficially owned by them as of the record date in favor of the adoption of the merger agreement and against any alternative transaction with respect to Aventine. Under the terms of the stockholders agreements, the eight stockholders have agreed to vote their pro-rata share of 51% of Aventine’s issued and outstanding common stock in favor of the merger-related proposals. For more information, please see copies of the stockholders agreements attached as Annex C-1 and Annex C-2 to this joint proxy statement/prospectus and the section titled “The Merger Agreement and Related Agreements—Stockholders Agreements” beginning on page 227 of this joint proxy statement/prospectus. In connection with entry into the stockholders agreements, the eight significant stockholders agreed to exercise any drag-along rights with respect to Aventine stockholders held by such significant stockholders. The drag-along right applies to certain stockholders of Aventine who are party to that certain Stockholder Agreement, dated September 24, 2012, by and among Aventine and the investors and the stockholders party thereto (sometimes referred to as the Aventine Stockholders Agreement).

Q: What happens if Pacific Ethanol stockholders fail to approve the issuance of shares of Pacific Ethanol common stock and non-voting common stock, the amendment to Pacific Ethanol’s Certificate of Incorporation as contemplated by the merger agreement or the treatment of the merger by the holders of Pacific Ethanol Series B Preferred Stock as contemplated by the merger agreement?

A: In this circumstance, either party is permitted to terminate the merger agreement and, in the event of such termination, Pacific Ethanol is required to pay Aventine’s transaction expenses, up to a maximum amount of $1,994,000, to Aventine. See “The Merger Agreement and Related Agreements—Termination” and “—Termination Fee and Expenses” beginning on pages 225 and 226, respectively, of this joint proxy statement/prospectus.

Q: What happens if Aventine stockholders fail to adopt the merger agreement and the transactions contemplated thereby?

A: In this circumstance, either party is permitted to terminate the merger agreement. However, no termination fee is payable by Aventine if the merger agreement is terminated upon the occurrence of this event. See “The Merger Agreement and Related Agreements—Termination” and “—Termination Fee and Expenses” beginning on pages 225 and 226, respectively, of this joint proxy statement/prospectus.

Q: Am I entitled to exercise appraisal rights instead of receiving the per share merger consideration for my shares of Aventine common stock?

A: Aventine stockholders are entitled to appraisal rights under Section 262, provided they fully comply with and follow the procedures and satisfy the conditions set forth in Section 262. For more information regarding appraisal rights, see the section entitled “Appraisal Rights” beginning on page 252 of this joint proxy statement/prospectus. In addition, a copy of Section 262 is attached as Annex F to this joint proxy statement/prospectus. Failure to comply with Section 262 will result in your waiver of, or inability to exercise, appraisal rights. To the extent the drag-along is exercised pursuant to the Aventine Stockholders Agreement, the Aventine stockholders subject to the drag-along right have waived their respective appraisal rights with respect to the merger, which constitutes a drag-along transaction.

Q: Should I send in my Aventine stock certificates now?

A: No. Simultaneously with the mailing of the election form discussed above, the exchange agent will provide each Aventine stockholder with a transmittal letter and instructions for surrendering each share of Aventine common stock to the exchange agent in exchange for the merger consideration elected by such Aventine stockholder. See “The Merger Agreement and Related Agreements – Conversion of Shares; Exchange of Certificates” beginning on page 222 of this joint proxy statement/prospectus for more information regarding the procedure for exchanging your Aventine stock certificates for the merger consideration. Pacific Ethanol stockholders will keep their existing stock certificates.

Q: Are there risks that I, as a Pacific Ethanol stockholder, should consider in deciding to vote on the issuance of shares of Pacific Ethanol common stock and non-voting common stock, the amendment to Pacific Ethanol’s Certificate of Incorporation, as contemplated by the merger agreement and the agreement not to treat the merger as a liquidation, dissolution or winding up within the meaning of the Pacific Ethanol Series B Certificate of Designations or, as an Aventine stockholder, should consider in deciding to vote on the adoption of the merger agreement?

A: Yes. In evaluating the issuance of shares of Pacific Ethanol common stock and non-voting common stock and the amendment to Pacific Ethanol’s Certificate of Incorporation as contemplated by the merger agreement, or the adoption of the merger agreement and approval of the merger, you should carefully read this joint proxy statement/prospectus, including the risk factors discussed in the section entitled “Risk Factors” beginning on page 37 of this joint proxy statement/prospectus.

Q: Who can answer any questions I may have about the merger?

A: Pacific Ethanol stockholders may call Georgeson Inc., Pacific Ethanol’s proxy solicitors for the annual meeting, toll-free at 1-888-565-5423. Aventine stockholders may call Aventine’s Corporate Secretary, Christopher A. Nichols at 1-800-384-2665 toll-free or email chris.nichols@aventinerei.com.

SUMMARY – THE MERGER

This summary highlights selected information contained in this joint proxy statement/prospectus and does not contain all the information that may be important to you. Pacific Ethanol and Aventine urge you to read carefully this joint proxy statement/prospectus in its entirety, including the Annexes. Unless stated otherwise, all references in this joint proxy statement/prospectus to Pacific Ethanol refer to Pacific Ethanol, Inc., a Delaware corporation, all references to Aventine refer to Aventine Renewable Energy Holdings, Inc., a Delaware corporation, all references to Merger Sub refer to AVR Merger Sub, Inc., a Delaware corporation, and all references to the merger agreement refer to the Agreement and Plan of Merger, dated as of December 30, 2014, as amended on March 31, 2015, by and among Pacific Ethanol, Merger Sub, and Aventine, a copy of which is attached as Annex A to this joint proxy statement/prospectus and is incorporated by reference into this joint proxy statement/prospectus. See “Where you Can Find More Information” beginning on page 257. 

The Companies Involved in the Merger

Pacific Ethanol

Pacific Ethanol, Inc.
400 Capitol Mall, Suite 2060
Sacramento, CA 95814
(916) 403-2123

Pacific Ethanol is the leading producer and marketer of low-carbon renewable fuels in the Western United States. Pacific Ethanol produces and markets all the ethanol produced by four ethanol production facilities located in California, Idaho and Oregon (sometimes referred to as the Pacific Ethanol Plants), markets all the ethanol produced by two other ethanol producers in California and markets ethanol purchased from other third-party suppliers throughout the United States. Pacific Ethanol markets ethanol through its subsidiary, Kinergy Marketing LLC (sometimes referred to as Kinergy), and ethanol co-products, including wet distillers grains (sometimes referred to as WDG), a nutritious animal feed, and corn oil, for the Pacific Ethanol Plants.

Additional information about Pacific Ethanol and its subsidiaries is included in documents incorporated by reference in this joint proxy statement/prospectus. See “Where You Can Find More Information” beginning on page 257.

Aventine

Aventine Renewable Energy Holdings, Inc.
1300 S. 2^nd Street
Pekin, IL 61554 
(309) 347-9200

Aventine has been engaged in the production and marketing of corn-based fuel-grade ethanol in the United States since 1981.  Aventine markets and distributes ethanol to many of the leading energy and trading companies in the United States Aventine’s facilities also produce several co-products while producing ethanol, such as distillers grain, corn gluten meal and feed, corn oil, corn germ and grain distillers dried yeast. Aventine markets these co-products primarily to livestock producers and other end users as a substitute for corn and other sources of starch and protein.

For additional information about Aventine and its subsidiaries, see “The Companies—Aventine Renewable Energy Holdings, Inc.” beginning on page 56.

Merger Sub

Merger Sub, a wholly-owned subsidiary of Pacific Ethanol, is a Delaware corporation formed on December 29, 2014 for the sole purpose of effecting the merger. Upon completion of the merger, Merger Sub will merge with and into Aventine, with Aventine surviving as a wholly-owned subsidiary of Pacific Ethanol after the merger.

The Proposed Merger

Each of the Pacific Ethanol Board and Aventine Board has approved the merger of Pacific Ethanol and Aventine. Pacific Ethanol and Aventine have entered into the merger agreement pursuant to which Aventine will merge with Merger Sub, a newly formed, wholly-owned subsidiary of Pacific Ethanol, with Aventine surviving the merger as a wholly-owned subsidiary of Pacific Ethanol. In the merger, each issued and outstanding share of Aventine common stock (other than dissenting shares and shares held by Pacific Ethanol or Aventine) will be converted into the right to receive, at the election of the holder, pursuant to certain limitations in order to maintain the tax free status of the merger (i.e., no more than 20% of shares of Aventine common stock will be exchanged by the Aventine stockholders for shares of Pacific Ethanol non-voting common stock), (i) 1.25 shares of Pacific Ethanol common stock, (ii) 1.25 shares of Pacific Ethanol non-voting common stock, or (iii) a combination of Pacific Ethanol common stock and non-voting common stock resulting in such Aventine stockholder receiving a total number of shares of common stock and non-voting common stock equal to 1.25 times the number of shares of Aventine common stock held by such stockholder. This exchange ratio is fixed and will not be adjusted to reflect stock price changes prior to the closing.

Shares of Pacific Ethanol non-voting common stock are the same in all respects to shares of Pacific Ethanol’s common stock, except that holders of shares of non-voting common stock are not entitled to vote on matters submitted to Pacific Ethanol stockholders and shares of non-voting common stock are convertible into shares of common stock on a one-for-one basis no earlier than sixty-one days after such holder provides a notice of conversion to Pacific Ethanol.

The stockholders of Pacific Ethanol will continue to own their existing shares and the rights and privileges of their existing shares will not be affected by the merger. However, because Pacific Ethanol will be issuing new shares of Pacific Ethanol common stock and non-voting common stock to Aventine stockholders in the merger, the stockholders of Pacific Ethanol will experience dilution as a result of the issuance of shares in the merger and each outstanding share of Pacific Ethanol common stock immediately prior to the merger will represent a smaller percentage of the total number of shares of Pacific Ethanol common stock and non-voting common stock issued and outstanding after the merger. It is expected that Pacific Ethanol stockholders before the merger will hold approximately 58% of the total Pacific Ethanol common stock and non-voting common stock issued and outstanding immediately following completion of the merger. Thus, Pacific Ethanol stockholders before the merger will experience dilution in the amount of 42% as a result of the merger.

A copy of the merger agreement is attached as Annex A to this joint proxy statement/prospectus. Pacific Ethanol and Aventine encourage you to read the entire merger agreement carefully because they are the principal documents governing the merger. For more information on the merger agreement, see “The Merger Agreement and Related Agreements” beginning on page 208.

The merger is expected to be completed during the second quarter of 2015, subject to the satisfaction or waiver of the closing conditions.

Merger Consideration

In the merger, each issued and outstanding share of Aventine common stock (other than dissenting shares and shares held by Pacific Ethanol or Aventine) will be converted into the right to receive, at the election of the holder, pursuant to the terms of an election form to be distributed to all holders in advance of the special meeting and certain limitations in order to maintain the tax free treatment of the merger (i.e., no more than 20% of shares of Aventine common stock will be exchanged by the Aventine stockholders for shares of Pacific Ethanol non-voting common stock), (i) 1.25 shares of Pacific Ethanol common stock, (ii) 1.25 shares of Pacific Ethanol non-voting common stock, or (iii) a combination of Pacific Ethanol common stock and non-voting common stock resulting in such Aventine stockholder receiving a total number of shares of common stock and non-voting common stock equal to 1.25 times the number of shares of Aventine common stock held by such stockholder. Based upon the current number of issued and outstanding shares of Aventine common stock, an aggregate of approximately 17,755,300 shares of Pacific Ethanol common stock and non-voting common stock will be issued upon the closing of the merger, assuming no exercise or conversion of outstanding options and warrants. Pacific Ethanol will not issue any fractional shares in the merger. Instead, Aventine stockholders will receive cash (without interest) in lieu of such fractional share, after aggregating all fractional shares of Pacific Ethanol common stock issuable to that holder, determined by multiplying such fraction by the volume weighted average price of Pacific Ethanol common stock for the five trading days immediately prior to the closing date.

The inclusion of the option to receive non-voting common stock in exchange for Aventine common stock is an accommodation to the seven Candlewood affiliates (collectively, Aventine’s majority stockholder) that are party to the stockholders agreements who have expressed a desire to receive equity consideration that would not require compliance with the continuing disclosure obligations arising out of the reporting requirements under Sections 13(d) and 13(g) of the Exchange Act with respect to Pacific Ethanol common stock.

For a more complete description of the merger consideration, see “The Merger Agreement and Related Agreements—The Merger” beginning on page 208.

Treatment of Stock Options and Warrants

Pacific Ethanol will assume outstanding options and warrants to purchase shares of Aventine common stock in the merger. Each outstanding option and warrant to acquire Aventine common stock will be converted automatically at the effective time of the merger into an option or warrant to acquire Pacific Ethanol common stock and/or non-voting common stock, and will continue to be governed by the terms of the relevant Aventine stock plan and/or related agreements under which it was granted, except that the number of shares of Pacific Ethanol common stock for which each option or warrant is exercisable and the exercise price of each option or warrant will be adjusted based on the exchange ratio in the merger. In addition, the holder of an option or warrant to acquire Aventine common stock may elect to receive Pacific Ethanol common stock, non-voting common stock or a combination thereof upon the exercise of such option or warrant. As of May 1, 2015, there were outstanding warrants to purchase up to 787,855 shares of Aventine common stock, at an exercise price of $61.75, expiring on September 24, 2017 and outstanding options to purchase up to 3,140 shares of Aventine common stock at an exercise price of $3.55 expiring on February 24, 2022. For a more complete discussion of the treatment of Aventine options and other stock-based awards, see “The Merger Agreement and Related Agreements—Treatment of Aventine Stock Options” beginning on page 210 and “The Merger Agreement and Related Agreements—Treatment of Aventine Warrants” beginning on page 211.

Directors and Executive Management of Pacific Ethanol Following the Merger

As of the effective time of the merger, the board of directors of Pacific Ethanol will be comprised of the members of the Pacific Ethanol Board (currently seven members) and two designees nominated by holders of the majority of shares of Aventine common stock and who must be independent with respect to Pacific Ethanol. The current executive management of Pacific Ethanol will remain unchanged following the merger.

For a more complete discussion of the directors and management of Pacific Ethanol after the merger, see “Additional Interests of Certain of Aventine’s Directors and Executive Officers in the Merger—Leadership of the Combined Company” beginning on page 205.

Recommendation of the Pacific Ethanol Board

After careful consideration, the Pacific Ethanol Board unanimously recommends that holders of Pacific Ethanol common stock and Series B Preferred Stock vote “FOR” the issuance of Pacific Ethanol common stock and non-voting common stock in connection with the merger; vote “FOR” the amendment to Pacific Ethanol’s Certificate of Incorporation to authorize a class of non-voting common stock and vote “FOR” the adjournment of the annual meeting if necessary or advisable to permit further solicitation of proxies in the event there are not sufficient votes at the time of the annual meeting to approve all matters brought before the meeting; and that holders of Pacific Ethanol Series B Preferred Stock, vote “FOR” the agreement not to treat the merger as a liquidation, dissolution or winding up within the meaning of the Pacific Ethanol Series B Certificate of Designations.

For a more complete description of Pacific Ethanol’s reasons for the merger and the recommendations of the Pacific Ethanol Board, see “The Proposed Merger—Recommendation of the Pacific Ethanol Board and its Reasons for the Merger” beginning on page 176.

Recommendation of the Aventine Board

After careful consideration, the Aventine Board unanimously recommends that holders of Aventine common stock vote “FOR” the adoption of the merger agreement and approval of the merger and vote “FOR” the adjournment of the special meeting if necessary or advisable to permit further solicitation of proxies in the event there are not sufficient votes at the time of the special meeting to adopt the merger agreement and approve the merger. It should be noted that in connection with the merger, the Aventine Board will receive indemnification for acts or omissions occurring prior to the effective time of the merger. The merger agreement also provides that, prior to the effective time of the merger, Aventine will purchase “tail” officers’ and directors’ liability insurance policies on terms and conditions reasonably comparable to Aventine’s existing directors’ and officers’ liability insurance.

For a more complete description of Aventine’s reasons for the merger and the recommendation of the Aventine Board, see “The Proposed Merger—Recommendation of the Aventine Board and its Reasons for the Merger” beginning on page 188.

Opinion of Craig-Hallum Capital Group LLC

In connection with the transaction, the Pacific Ethanol Board received a written opinion from Craig-Hallum Capital Group LLC (sometimes referred to as Craig-Hallum), as to the fairness, from a financial point of view and as of the date of its opinion, of the exchange ratio in the transaction to Pacific Ethanol. The full text of Craig-Hallum’s written opinion, dated December 29, 2014, is attached to this joint proxy statement/prospectus as Annex D. Holders of Pacific Ethanol common stock and Series B Preferred Stock are encouraged to read this opinion carefully in its entirety for a description of the assumptions made, procedures followed, matters considered and limitations on the review undertaken. Craig-Hallum did not act as a financial advisor to any party to the transaction. Craig-Hallum’s opinion was provided to the Pacific Ethanol Board in connection with, and for the purposes of, its evaluation of the exchange ratio in the transaction from a financial point of view, does not address the merits of the underlying decision by Pacific Ethanol to engage in the transaction or the relative merits of any alternatives discussed by the Pacific Ethanol Board, does not constitute an opinion with respect to Pacific Ethanol’s underlying business decision to effect the transaction, any legal, tax or accounting issues concerning the transaction, or any terms of the transaction (other than the exchange ratio) and does not constitute a recommendation as to any action Pacific Ethanol or any holder of Pacific Ethanol common stock or Series B Preferred Stock should take in connection with the transaction or any aspect thereof.

For a more complete description of Craig-Hallum’s opinion, see “The Proposed Merger—Opinion of Craig-Hallum Capital Group LLC” beginning on page 179. See also Annex D to this joint proxy statement/prospectus.

Opinion of Aventine Financial Advisor

Duff & Phelps, LLC (sometimes referred to as Duff & Phelps), delivered an opinion to the Aventine Board that, subject to and based upon the assumptions and limiting conditions set forth therein, as of the date of its opinion, the exchange ratio payable to Aventine’s stockholders electing Pacific Ethanol common stock in the merger was fair from a financial point of view to such stockholders of Aventine. The full text of Duff & Phelps’ written opinion, dated March 31, 2015, is attached as Annex E to this joint proxy statement/prospectus. Holders of shares of Aventine common stock are urged to read the opinion carefully and in its entirety. Duff & Phelps’ opinion does not and shall not constitute a recommendation to any holders of shares of Aventine common stock as to how they should vote in connection with the merger. This summary of Duff & Phelps’ opinion contained in this joint proxy statement/prospectus is qualified in its entirety by reference to the full text of the opinion.

For a more complete description of the Duff & Phelps opinion, see “The Proposed Merger—Opinion of Financial Advisor to the Aventine Board” beginning on page 191. See also Annex E to this joint proxy statement/prospectus.

Interests of Certain Aventine Directors and Executive Officers in the Merger

You should be aware that some Aventine directors and executive officers may have interests in the transaction that may be different from, or in addition to, the interests of stockholders of Aventine.

For a further discussion of interests of certain Aventine directors and executive officers in the merger, see “Additional Interests of Certain of Aventine Directors and Executive Officers in the Merger” beginning on page 205.

Material United States Federal Income Tax Consequences of the Merger

Pacific Ethanol and Aventine intend for the merger to qualify as a reorganization within the meaning of Section 368(a) of the Code for United States federal income tax purposes. Assuming the merger does qualify as a reorganization, Aventine stockholders generally will not recognize gain or loss for United States federal income tax purposes upon the receipt of Pacific Ethanol common stock and/or non-voting common stock in the merger, except that an Aventine stockholder will recognize gain or loss with respect to any cash received in lieu of a fractional share of Pacific Ethanol common stock and/or non-voting common stock, and except to the extent that any payment by Aventine of transfer taxes is treated as taxable consideration received by Aventine stockholders. In order to maintain the tax free treatment of the merger, Pacific Ethanol is limited in the amount of Pacific Ethanol non-voting common stock that may be issued to Aventine common stockholders as merger consideration. Specifically, no more than 20% of shares of Aventine common stock will be exchanged by the Aventine stockholders for shares of Pacific Ethanol common stock. Aventine stockholders who exercise their appraisal rights will recognize gain or loss with respect to cash received in exchange for their Aventine common stock.

Tax matters are very complicated and the tax consequences of the merger to you, if you are an Aventine stockholder, will depend upon the facts of your situation. In addition, you may be subject to state, local or foreign tax laws that are not addressed in this joint proxy statement/prospectus. You are urged to consult with your own tax advisors for a full understanding of the tax consequences of the merger to you.

For a more complete description of the material United States federal income tax consequences of the merger, see “The Proposed Merger—Material United States Federal Income Tax Consequences of the Merger” beginning on page 197.

Forward-Looking Financial Information

Pacific Ethanol prepared forward-looking financial information for years 2015 through 2019 for each of Pacific Ethanol and Aventine. Aventine also prepared forward-looking financial information for years 2015 through 2019 for each of Pacific Ethanol and Aventine. The forward-looking financial information prepared by each of the companies is on a stand-alone basis and is not intended to be added together, and adding together the forward-looking financial information for the two companies would not represent the results the combined company will achieve if the merger is completed and does not represent forward-looking financial information for the combined company. The following forward-looking financial information was not prepared with a view toward public disclosure or with a view toward complying with the guidelines established by the American Institute of Certified Public Accountants with respect to forward-looking financial information.

Pacific Ethanol Forward-Looking Financial Information

Pacific Ethanol does not as a matter of course make public projections as to future earnings or other results of operations (other than providing estimates for certain financial items on a near-term basis in its regular earnings press releases and other communications with investors) or detailed business plans or strategies. However, for internal purposes and in connection with the process leading to the merger agreement, the management of Pacific Ethanol prepared certain projections of future financial and operating performance for each of Pacific Ethanol and Aventine and for the combined company for the years 2015 through 2019.

Pacific Ethanol and Aventine prepared projections that are included in this joint proxy statement/prospectus because these projections were provided to Craig-Hallum in connection with Craig-Hallum’s opinion as to the fairness of the exchange ratio in the transaction to Pacific Ethanol. In preparing the projections for Craig Hallum, management of both Pacific Ethanol and Aventine used assumptions for crush margins (the differential between the price per gallon of ethanol and the price per gallon equivalent for corn) generally consistent with industry averages for 2014 in order that Craig-Hallum could evaluate the relative projected performance of both companies on a common basis. Pacific Ethanol viewed those assumptions made in preparing these projections as being reasonable for the purposes they were being used. Further, both Pacific Ethanol’s and Aventine’s projections took into account the respective management’s views of the likely future operating results of their respective plants, given recent results and expected effects of substantial recent capital investments in the plants.

The projections provided to Craig-Hallum were not prepared with a view toward public disclosure and the inclusion of summary projections herein should not be regarded as an indication that either Pacific Ethanol or Aventine considered, or now considers, these projections to be predictive of actual future results and readers of this joint proxy statement/prospectus are cautioned not to rely on this forward-looking financial information.

Neither Pacific Ethanol’s nor Aventine’s independent auditors, nor any other independent accountants, have compiled, examined, or performed any procedures with respect to the forward-looking financial information contained herein, nor have they expressed any opinion or any other form of assurance on such information or its achievability, and assume no responsibility for, and disclaim any association with, the forward-looking financial information.

The following table presents a summary of the projections for Pacific Ethanol that were provided to Craig-Hallum:

__________

Management of Pacific Ethanol also prepared certain projections for its own internal use and for the use of the Pacific Ethanol Board (sometimes referred to as the Pacific Ethanol Board Projections). The Pacific Ethanol Board Projections forecasted performance of Pacific Ethanol on a stand-alone basis, Aventine on a stand-alone basis, and the performance of the combined company following the merger. In preparing the Pacific Ethanol Board Projections, management of Pacific Ethanol used assumptions based on average crush margins for the period beginning January 1, 2012 and ending November 30, 2014, which covered a period of time that included both historically high and low crush margins. These crush margin assumptions were approximately $0.35 per gallon lower than the crush margin assumptions used in the projections for Craig-Hallum summarized above. Management elected to use these lower crush margin assumptions because the Pacific Ethanol Board Projections were used for different purposes than the projections provided to Craig-Hallum. To better assess potential liquidity needs of the combined company, management of Pacific Ethanol believed that it was important to make conservative crush margin assumptions based on multi-year historical averages. These assumptions were viewed by Pacific Ethanol as being reasonable for the purposes they were being used.

In preparing the projections for Aventine on a stand-alone basis and for the combined company, Pacific Ethanol’s management also took into account their view of the likely future operating results of Aventine’s ethanol plants, given recent results and expected effects of substantial recent capital investments in the plants. In preparing the projections for the combined company, Pacific Ethanol’s management also took into account significant planned and potential capital expenditures in 2015 and certain cost synergies expected to be realized following the closing of the merger.

The Pacific Ethanol Board Projections were not prepared with a view toward public disclosure and the inclusion of summary projections herein should not be regarded as an indication that Pacific Ethanol considered, or now considers, these projections to be predictive of actual future results and readers of this joint proxy statement/prospectus are cautioned not to rely on this forward-looking financial information.

Neither Pacific Ethanol’s nor Aventine’s independent auditors, nor any other independent accountants, have compiled, examined, or performed any procedures with respect to the forward-looking financial information contained herein, nor have they expressed any opinion or any other form of assurance on such information or its achievability, and assume no responsibility for, and disclaim any association with, the forward-looking financial information.

The following table presents a summary of the projections for Pacific Ethanol on a stand-alone basis, for Aventine on a stand-along basis, and for the combined company that were prepared by the management of Pacific Ethanol and provided to the Pacific Ethanol Board:

__________

The assumptions and estimates underlying forward-looking information for Pacific Ethanol and Aventine are inherently uncertain and, though considered reasonable by Pacific Ethanol’s management as of the date of their preparation, are subject to a wide variety of significant business, economic, and competitive risks and uncertainties that could cause actual results to differ materially from those contained therein, chief among them being the price of corn and other feedstocks and the price of ethanol and co-products. Other factors include, among others, the following: the ultimate timing, outcome and results of integrating the operations of Pacific Ethanol and Aventine and the degree to which Pacific Ethanol’s operating efficiencies are applied to Aventine products and services; changes in the demand for or price of oil and/or natural gas; changes in government regulations and regulatory requirements, particularly those matters described in the sections entitled “Cautionary Statement Regarding Forward-Looking Statements” beginning on page 55, “Risk Factors” beginning on page 37 and Part I, Item IA in Pacific Ethanol’s 2014 Annual Report on Form 10-K. The Pacific Ethanol projections for Pacific Ethanol, the Pacific Ethanol projections for Aventine and the Pacific Ethanol projections for the combined company also reflect assumptions as to certain business decisions that are subject to change. Accordingly, there can be no assurance that the forward-looking results are indicative of the future performance of Pacific Ethanol or Aventine or that actual results will not differ materially from those presented in the Pacific Ethanol projections for Pacific Ethanol, the Pacific Ethanol projections for Aventine or the Pacific Ethanol projections for the combined company. Inclusion of the Pacific Ethanol projections for Pacific Ethanol, the Pacific Ethanol projections for Aventine and the Pacific Ethanol projections for the combined company in this joint proxy statement/prospectus should not be regarded as a representation by any person that the results contained in the forward-looking financial information will be achieved.

Pacific Ethanol does not intend to update or otherwise revise the forward-looking financial information to reflect circumstances existing since their preparation or to reflect the occurrence of unanticipated events, even in the event that any or all of the underlying assumptions are shown to be in error. Furthermore, Pacific Ethanol does not intend to update or revise the forward-looking financial information in this joint proxy statement/prospectus to reflect changes in general economic or industry conditions.

The information concerning forward-looking financial information provided by Pacific Ethanol is not included in this joint proxy statement/prospectus in order to induce any stockholder to vote in favor of the stock issuance or to acquire securities of Pacific Ethanol.

Aventine Forward-Looking Financial Information

Aventine does not as a matter of course make public projections as to future earnings or other results of operations other than providing estimates for certain financial items on a near-term basis on its regular earnings calls. However, for internal purposes and in connection with the process leading to the merger agreement, the management of Aventine prepared certain projections of future financial and operating performance of each of Aventine and Pacific Ethanol for the years 2015 through 2019. Aventine prepared its Pacific Ethanol projections based on publicly available information. These projections are included in this joint proxy statement/prospectus because Aventine provided such projections to its financial advisor, Duff & Phelps, in connection with the merger. Aventine discussed these projections with the Aventine Board in connection with Duff & Phelps’ presentation during the special meeting of the Aventine Board held on March 31, 2015. Aventine, however, did not prepare financial projections for the combined company, and the Aventine Board did not consider financial projections for the combined company or the lack thereof in connection with its evaluation of the merger. The financial performance of the respective businesses of Pacific Ethanol and Aventine is significantly dependent upon commodity pricing. The Aventine Board recognizes the difficulty in forecasting commodity pricing. Accordingly, the Aventine Board does not believe financial projections for the combined company provide a compelling analysis of the transaction. Furthermore, as the target of the acquisition by merger, Aventine does not control and is not in the position to determine any synergies or cost savings from combining the companies that would be necessary in order to produce projections for the combined company. Alternatively, the Aventine Board identified other factors with respect to the combined company which were influential in its analysis of the transaction, including but not limited to, the combined company’s stronger balance sheet, enhanced liquidity profile, diverse geographical footprint and enhanced potential to pursue strategic initiatives. A more complete discussion of the factors that the Aventine Board considered with respect to the approval of the merger are described in “The Proposed Merger – Recommendation of the Aventine Board and its Reasons for the Merger” beginning on page 188.

The following prospective financial information was not prepared with a view toward public disclosure or with a view toward complying with GAAP with respect to prospective financial information. In the view of Aventine’s management, the information was prepared on a reasonable basis and reflected the best then currently available estimates and judgments at the time of its preparation, and presented at the time of its preparation, to the best of Aventine management’s knowledge and belief, reasonable projections of the future financial performance of Aventine and Pacific Ethanol. However, these projections have not been updated, are not fact and should not be relied upon as being indicative of future results, and readers of this joint proxy statement/prospectus are cautioned not to rely on this forward-looking financial information.

Neither Aventine’s nor Pacific Ethanol’s independent auditors, nor any other independent accountants, have compiled, examined, or performed any procedures with respect to the forward-looking financial information contained herein, nor have they expressed any opinion or any other form of assurance on such information or its achievability, and assume no responsibility for, and disclaim any association with, the forward looking financial information.

The following tables present a summary of the Aventine projections and the Aventine projections for Pacific Ethanol.

______________

The assumptions and estimates underlying forward-looking information for Aventine are inherently uncertain and, though considered reasonable by Aventine’s management as of the date of their preparation, are subject to a wide variety of significant business, economic, and competitive risks and uncertainties that could cause actual results to differ materially from those contained therein, chief among them being the price of corn and other feedstocks and the price of ethanol and co-products. Other factors include, among others, the following: changes in the demand for or price of oil and/or natural gas; changes in government regulations and regulatory requirements, particularly those matters described in the sections entitled “Cautionary Statement Regarding Forward-Looking Statements” beginning on page 55 and “Risk Factors” beginning on page 37. The Aventine projections also reflect assumptions as to certain business decisions that are subject to change. Accordingly, there can be no assurance that the forward-looking results are indicative of the future performance of Aventine or that actual results will not differ materially from those presented in the Aventine projections. Inclusion of the Aventine projections in this joint proxy statement/prospectus should not be regarded as a representation by any person that the results contained in the forward-looking financial information will be achieved.

Aventine does not intend to update or otherwise revise the forward-looking financial information to reflect circumstances existing since their preparation or to reflect the occurrence of unanticipated events, even in the event that any or all of the underlying assumptions are shown to be in error. Furthermore, Aventine does not intend to update or revise the forward-looking financial information to reflect changes in general economic or industry conditions.

The information concerning forward-looking financial information provided by Aventine is not included in this joint proxy statement/prospectus in order to induce any stockholder to vote in favor of the merger agreement.

Accounting Treatment of the Merger

The merger will be accounted for as an acquisition by Pacific Ethanol of Aventine under the acquisition method of accounting according to United States generally accepted accounting principles.

Regulatory Matters

Under the Hart-Scott-Rodino Antitrust Improvements Act (sometimes referred to as the HSR Act), and the rules promulgated thereunder by the Federal Trade Commission (sometimes referred to as the FTC), the merger cannot be completed until each of Pacific Ethanol and Aventine files a notification and report form with the FTC and the Antitrust Division of the Department of Justice (sometimes referred to as the DOJ) under the HSR Act and the applicable waiting period has expired or been terminated. Each of Pacific Ethanol and Aventine filed an initial notification and report form with the FTC and the DOJ on February 3, 2015. On February 18, 2015, the FTC notified Pacific Ethanol and Aventine of the early termination of the waiting period under the HSR Act.

These filings and approvals are more fully described in “The Proposed Merger—Regulatory Matters Relating to the Merger” beginning on page 201.

Conditions to Completion of the Merger

Pacific Ethanol and Aventine expect to complete the merger after all the conditions to the merger in the merger agreement are satisfied or waived, including after the receipt of stockholder approvals at their respective stockholder meetings. In addition to obtaining such stockholder approvals, each of the other closing conditions set forth in the merger agreement must be satisfied. Pacific Ethanol and Aventine currently expect to complete the merger during the second quarter of 2015. However, it is possible that factors outside of either company’s control could cause the merger to be completed at a later time or not at all. The merger agreement provides that the conditions to the closing of the merger may be waived, in whole or in part, by Pacific Ethanol or Aventine, to the extent legally allowed. Neither Pacific Ethanol nor Aventine currently expects to waive any immaterial or material condition to the completion of the merger. If either Pacific Ethanol or Aventine determines to waive any material condition to the merger and such waiver renders the disclosure in this joint proxy statement/prospectus materially misleading, proxies will be resolicited from the Pacific Ethanol and/or Aventine stockholders, as applicable.

For a more complete discussion of the conditions to the merger, see “The Merger Agreement and Related Agreements—Conditions to Completion of the Merger” beginning on page 222.

No Solicitation of Other Offers

The merger agreement contains certain restrictions on the ability of Aventine to solicit or engage in discussions or negotiations with a third party with respect to a proposal to acquire Aventine’s equity or assets. Notwithstanding these restrictions, the merger agreement provides that under specified circumstances, if Aventine receives an unsolicited bona fide proposal from a third party to acquire a significant interest in it that the Aventine Board determines in good faith is reasonably likely to lead to a proposal that is superior to the merger, Aventine may furnish nonpublic information to that third party and engage in negotiations regarding an acquisition proposal with that third party.

For a discussion of the prohibition on solicitation of acquisition proposals from third parties, see “The Merger Agreement and Related Agreements—Non-Solicitation; Change in Recommendation” beginning on page 220.

Termination

Pacific Ethanol and Aventine may mutually agree at any time prior to the completion of the merger (including after stockholder approval) to terminate the merger agreement and abandon the merger. In addition, the merger agreement may be terminated by either Pacific Ethanol or Aventine under certain circumstances or upon the occurrence of certain events.

For a discussion of termination provisions of the merger agreement, see “The Merger Agreement and Related Agreements—Termination” beginning on page 225.

Termination Fees and Expenses

Aventine is required to pay a termination fee of $5,982,000 to Pacific Ethanol in the event the merger agreement is terminated by Aventine in connection with the entry into an agreement for a superior proposal or in the event the merger agreement is terminated by Pacific Ethanol if prior to the time that the Aventine stockholder vote approving the merger has been obtained (i) the Aventine Board makes a change in recommendation in favor of the merger with Pacific Ethanol, (ii) the Aventine Board approves or recommends to its stockholders a takeover proposal from someone other than Pacific Ethanol, (iii) a tender offer or exchange offer for shares of Aventine’s common stock that constitutes a takeover proposal is commenced by someone other than Pacific Ethanol and the Aventine Board recommends that holders of Aventine common stock tender their shares in such tender offer or exchange offer or the board of directors of Aventine fails to recommend that holders of Aventine common stock reject such tender offer or exchange offer, or (iv) there has been a material breach by Aventine of its obligations under the merger agreement to call a special meeting of the Aventine stockholders for the purpose of adopting the merger agreement and recommending that all Aventine stockholders vote to approve the merger or the non-solicitation provisions of the merger agreement.

Pacific Ethanol is required to pay a termination fee of $5,982,000 to Aventine if there shall occur an event, or Pacific Ethanol becomes aware of information not known by Pacific Ethanol as of December 28, 2014 which, upon the occurrence of such event or upon Pacific Ethanol learning of such information, that would be reasonably viewed as either resulting in, or substantially increasing the likelihood of, a material adverse result in any litigation matter between Aventine and Aurora Cooperative Elevator Company (sometimes referred to as the Aurora Coop) existing as of December 28, 2014 (sometimes referred to as the Aurora Coop Litigation).

In the event the merger agreement is terminated by Aventine or Pacific Ethanol as a result of the failure of Pacific Ethanol’s stockholders to approve the issuance of shares of Pacific Ethanol common stock and non-voting common stock, the amendment of Pacific Ethanol’s Certificate of Incorporation, and the agreement by the holders of Pacific Ethanol Series B Preferred Stock not to treat the merger as a liquidation, dissolution or winding up within the meaning of the Pacific Ethanol Series B Certificate of Designations, Pacific Ethanol must reimburse Aventine for fees or expenses incurred by Aventine in connection with the proposed merger up to a maximum amount of $1,994,000.

See “The Merger Agreement and Related Agreements—Termination Fee and Expenses” and “—Effect of Termination,” beginning on pages 226 and 227, respectively.

Stockholders Agreements

In order to induce Pacific Ethanol to enter into the merger agreement, eight holders of outstanding shares of Aventine common stock (seven of whom are affiliated with Candlewood) have entered into stockholders agreements with Pacific Ethanol, pursuant to which they have agreed, solely in their capacity as stockholders of Aventine, to vote their pro-rata share of 51% of Aventine’s issued and outstanding common stock in favor of the merger and adoption of the merger agreement and, with respect to all other proposals submitted to the Aventine stockholders, which would reasonably be expected to prevent or materially delay the consummation of the merger, in such a manner as directed by Pacific Ethanol. The stockholders agreements also subject the stockholders to certain market stand-off restrictions with respect to the shares of Pacific Ethanol common stock and/or non-voting common stock received in the merger. In connection with entry into the stockholders agreements, the eight significant stockholders agreed to exercise any drag-along rights with respect to Aventine stockholders held by such significant stockholders. Under the Aventine Stockholders Agreement, upon the exercise of the drag-along right by a majority stockholder(s), the Aventine stockholders party to such agreement who are being “dragged” along, have agreed (pursuant to the terms of the Aventine Stockholders Agreement) to waive their respective appraisal rights in connection with the merger. The “dragged” Aventine stockholders have further agreed (pursuant to the terms of the Aventine Stockholders Agreement) to cast all votes to which such stockholders are entitled, in favor of the merger. Copies of the stockholders agreements are attached to this joint proxy statement/prospectus as Annex C-1 and Annex C-2. See “The Merger Agreement and Related Agreements—Stockholders Agreements” beginning on page 227.

Shares Beneficially Owned by Directors and Executive Officers of Pacific Ethanol and Aventine

Pacific Ethanol’s directors and executive officers held 701,571 shares of Pacific Ethanol common stock and 282,050 shares of Pacific Ethanol Series B Preferred Stock as of April 23,, 2015, the record date for the annual meeting. On matters where holders of Pacific Ethanol common stock vote with the holders of Pacific Ethanol Series B Preferred Stock together as a single class, Pacific Ethanol’s directors and executive officers are entitled to 894,679 votes (after giving effect to the Preferred Voting Ratio), representing in total 3.62% of the total voting power of Pacific Ethanol’s voting securities outstanding and entitled to vote as of the record date. On matters where holders of Pacific Ethanol Series B Preferred Stock vote as a separate class, Pacific Ethanol’s directors and executive officers are entitled to 282,050 votes, representing 30.42% of the total number of shares of Pacific Ethanol Series B Preferred Stock outstanding and entitled to vote as of the record date. To approve the issuance of shares of Pacific Ethanol common stock and non-voting common stock in the merger (Proposal 1), the affirmative vote of (i) if a quorum is present at the annual meeting, the holders of a majority of shares of Pacific Ethanol common stock and Series B Preferred Stock, present in person or represented by proxy at the annual meeting, voting together as a single class and entitled to vote (giving effect to the Preferred Voting Ratio) and (ii) the holders of a majority of the outstanding shares of Series B Preferred Stock voting as a separate class and entitled to vote, is required. Pacific Ethanol currently expects that Pacific Ethanol’s directors and executive officers will vote their shares “FOR” all the proposals to be voted on at the annual meeting, although none of them has entered into any agreements obligating them to do so.

Aventine’s directors and executive officers did not beneficially own any shares of Aventine common stock on April 23, 2015, the record date for the special meeting.

Appraisal Rights

Under Delaware law, Pacific Ethanol stockholders are not entitled to appraisal rights in connection with the issuance of shares of Pacific Ethanol common stock and non-voting common stock as contemplated by the merger agreement. Aventine stockholders of record have appraisal rights under the Delaware General Corporation Law (sometimes referred to as the DGCL) in connection with the merger. To the extent the drag-along is exercised pursuant to the Aventine Stockholders Agreement, the Aventine stockholders subject to the drag-along right have waived their respective appraisal rights arising out of a drag-along transaction. For further discussion of appraisal rights, see “The Proposed Merger—Appraisal Rights” beginning on page 211.

Comparison of the Rights of Pacific Ethanol and Aventine Stockholders

The rights of Aventine stockholders as Pacific Ethanol stockholders after the merger will be governed by Pacific Ethanol’s Certificate of Incorporation and bylaws, each as amended, and the laws of the State of Delaware. Those rights differ from the rights of Aventine stockholders under Aventine’s Certificate of Incorporation and bylaws. See “Comparison of Rights of Pacific Ethanol and Aventine Stockholders” beginning on page 259.

SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF PACIFIC ETHANOL

The selected historical consolidated financial data of Pacific Ethanol for each of the years ended December 31, 2014, 2013 and 2012, and as of December 31, 2014 and 2013 have been derived from Pacific Ethanol’s audited consolidated financial statements and related notes contained in its Annual Report on Form 10-K for the year ended December 31, 2014, which is incorporated by reference in this joint proxy statement/prospectus. The selected historical consolidated financial data for the years ended December 31, 2011 and 2010 and as of December 31, 2012, 2011 and 2010 have been derived from Pacific Ethanol’s audited consolidated financial statements and related notes, which have not been incorporated by reference in this joint proxy statement/prospectus. The information set forth below is only a summary and is not necessarily indicative of the results of future operations of Pacific Ethanol or the combined company, and you should read the following information together with Pacific Ethanol’s audited consolidated financial statements, the related notes and the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained in Pacific Ethanol’s Annual Report on Form 10-K for the year ended December 31, 2014, which is incorporated by reference in this joint proxy statement/prospectus. For more information, see the section entitled “Where You Can Find More Information” beginning on page 257.

SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF AVENTINE

The selected historical consolidated financial data of Aventine for each of the years ended December 31, 2014 and 2013 have been derived from audited consolidated financial statements and related notes, included herein, which are incorporated by reference in this joint proxy statement/prospectus. The selected historical consolidated financial data for the years ended December 31, 2012, 2011 and 2010 have been derived from Aventine’s unaudited consolidated financial statements for such periods. The information set forth below is only a summary and is not necessarily indicative of the results of future operations of Aventine or the combined company, and you should read the following information together with Aventine’s audited consolidated financial statements, the related notes and the section entitled “The Companies—Aventine Renewable Energy Holdings, Inc. —Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained in this joint proxy statement/prospectus.

__________

SELECTED UNAUDITED PRO FORMA
COMBINED CONDENSED FINANCIAL INFORMATION

The following selected unaudited pro forma combined condensed financial information has been prepared to illustrate the effect of the merger. The unaudited pro forma combined condensed balance sheet information gives effect to the merger as if it occurred on December 31, 2014. The unaudited pro forma combined condensed statements of operations information for the year ended December 31, 2014 gives effect to the merger as if it occurred on January 1, 2014.

This unaudited pro forma combined condensed financial information is for informational purposes only. It does not purport to indicate the results that would actually have been obtained had the merger been completed on the assumed date or for the periods presented. A final determination of the fair value of Aventine’s assets and liabilities will be based on the actual net tangible and intangible assets and liabilities that exist as of the date of closing of the merger and, therefore, cannot be made prior to that date. Additionally, the value of the portion of the merger consideration to be paid in shares of Pacific Ethanol common stock will be determined based on the trading price of Pacific Ethanol’s common stock at the time of the closing of the merger.

This unaudited pro forma combined condensed financial information should not be considered predictive of results that may be realized in the future. During the periods covered by the pro forma financial statements, Pacific Ethanol had one and Aventine had two idled plants. In addition, Aventine has made recent improvements in plant and logistical assets, the full impact of which was not realized during the periods covered. For a discussion of the factors the Pacific Ethanol Board considered in evaluating the Aventine’s historical financial information, see “The Proposed Merger—Recommendation of the Pacific Ethanol Board and its Reasons for the Merger” beginning on page 176.

EQUIVALENT AND COMPARATIVE PER SHARE INFORMATION

The tables below reflect:

The following tables should be read in conjunction with the historical audited consolidated financial statements and accompanying notes of each of Pacific Ethanol and Aventine which are included elsewhere in this joint proxy statement/prospectus.

The unaudited pro forma data are presented for illustrative purposes only and are not necessarily indicative of actual or future financial position or results of operation that would have been realized if the proposed merger had been completed as of the date indicated or will be realized upon completion of the proposed merger. See the section entitled “Unaudited Pro Forma Combined Condensed Financial Statements” beginning on page 229 of this joint proxy statement/prospectus.

The above tables show only historical comparisons. Because the market prices of Pacific Ethanol common stock and Aventine common stock will likely fluctuate prior to the merger, these comparisons may not provide meaningful information to Pacific Ethanol stockholders in determining whether to approve the issuance of shares of Pacific Ethanol common stock and non-voting common stock in the merger or to Aventine stockholders in determining whether to adopt the merger agreement and approve the merger. Pacific Ethanol and Aventine stockholders are encouraged to obtain current market quotations for Pacific Ethanol common stock and Aventine common stock and to review carefully the other information contained in this joint proxy statement/prospectus in considering whether to approve the respective proposals before them.

The following table presents:

in each case, on December 30, 2014, the last full trading day prior to the public announcement of the proposed merger, and on May 1, 2015, the last practicable trading day prior to the date of this joint proxy statement/prospectus.

Pacific Ethanol and Aventine stockholders are advised to obtain current market quotations for Pacific Ethanol common stock and Aventine common stock. The market price of Pacific Ethanol common stock and Aventine common stock may fluctuate between the date of this joint proxy statement/prospectus and the date of completion of the merger. No assurance can be given concerning the market price of Pacific Ethanol common stock or Aventine common stock before the effective time of the merger or the market price of Pacific Ethanol common stock after the effective time of the merger. Changes in the market price of Pacific Ethanol common stock prior to the completion of the merger will affect the market value of the stock portion of the merger consideration that Aventine stockholders will receive upon completion of the merger.

No cash dividends have been paid on either Pacific Ethanol common stock or Aventine common stock during the two most recent fiscal years, and neither company intends to pay cash dividends on its common stock in the immediate future.

It should be noted that Aventine common stock is not listed on any exchanges and the daily trading volume of its common shares is very low in relation to the total number of shares issued and outstanding (as reported by The Bloomberg Professional service, the average daily trade volume for every quarter since Q1 2013 has been less than 1.5% of total shares issued and outstanding). Based on the stock transfer procedures outlined in Aventine’s Stockholders Agreement, Aventine is notified from time to time when shares subject to the terms of the Aventine Stockholders Agreement have traded in transactions that are not reported on the OTCBB. The actual transaction price of the shares and the actual average daily trading volume in these transactions are not provided to Aventine. As a result, trade information on the OTCBB may be unreliable and may not be indicative of the value of Aventine’s common stock at any particular point in time. Aventine stockholders should not solely rely on the trade information provided on the OTCBB in making a determination of the fair value of Aventine’s stock price and should review carefully the other information contained in this joint proxy statement/prospectus in considering whether to approve the respective proposals before them.

RISK FACTORS

In addition to the other information included or incorporated by reference in this joint proxy statement/prospectus, including the matters addressed in the section entitled “Cautionary Statement Regarding Forward-Looking Statements” beginning on page 55, you should carefully consider the following risks before deciding how to vote. In addition, you should read and consider the risk factors associated with the businesses of Pacific Ethanol and Aventine because those risks will also affect the combined company. Risks associated with the business of Pacific Ethanol can be found under the caption, “Risk Factors” in Part I, Item 1A of Pacific Ethanol’s Amendment No. 1 to Annual Report on Form 10-K/A for the fiscal year ended December 31, 2014, filed with the Securities and Exchange Commission on April 13, 2015, as such risks may be updated or supplemented in Pacific Ethanol’s subsequently filed Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, which are incorporated by reference into this joint proxy statement/prospectus. Risks associated with the business of Aventine can be found below. You should also read and consider the other information in this joint proxy statement/prospectus and the other documents incorporated by reference in this joint proxy statement/prospectus. See the section entitled “Where You Can Find More Information” beginning on page 257.

Risks Related to the Merger

Because the market price of Pacific Ethanol common stock will fluctuate, Aventine stockholders cannot be sure of the market value of the Pacific Ethanol common stock that they will receive in the merger.

When we complete the merger, each share of Aventine common stock will be converted into the right to receive (i) 1.25 shares of Pacific Ethanol common stock, (ii) 1.25 shares of non-voting common stock (subject to certain limitations necessary to maintain the tax free treatment of the merger), or (iii) a combination of Pacific Ethanol common stock and non-voting common stock resulting in such Aventine stockholder receiving a total number of shares of common stock and non-voting common stock equal to 1.25 times the number of shares of Aventine common stock held by such stockholder. Specifically, no more than 20% of shares of Aventine common stock will be exchanged by the Aventine stockholders for shares of Pacific Ethanol non-voting common stock. The exchange ratio is fixed and will not be adjusted for changes in the market price of either Pacific Ethanol common stock or Aventine common stock. The market value of Pacific Ethanol common stock will continue to fluctuate until the completion of the merger. For example, during the fourth quarter of 2014 and the first quarter of 2015, the closing sales price of Pacific Ethanol common stock ranged from a low of $7.58 to a high of $15.13, as reported on The NASDAQ Capital Market. On May 1, 2015 the closing sales price of Pacific Ethanol common stock was $12.23. The merger agreement does not provide for any price-based termination right for either party. Accordingly, the market value of the shares of Pacific Ethanol common stock that Pacific Ethanol issues and Aventine stockholders will be entitled to receive when the parties complete the merger will depend on the market value of shares of Pacific Ethanol common stock at the time that the parties complete the merger and could vary significantly from the market value on the date of this proxy statement/prospectus or the date of the Pacific Ethanol annual meeting and the Aventine special meeting.

The announcement and pendency of the merger could have an adverse effect on Pacific Ethanol’s and Aventine’s stock prices, business, financial condition, results of operations or business prospects.

While neither Pacific Ethanol nor Aventine is aware of any significant adverse effects to date, the announcement and pendency of the merger could disrupt Pacific Ethanol’s and/or Aventine’s businesses in the following ways, among others:

Should they occur, any of these matters could adversely affect the stock prices of, or harm the financial condition, results of operations or business prospects of, Pacific Ethanol and/or Aventine.

The market price of Pacific Ethanol common stock and non-voting common stock after the merger may be affected by factors different from those affecting the shares of Aventine or Pacific Ethanol currently.

Upon completion of the merger, holders of Aventine common stock will become holders of Pacific Ethanol common stock and/or non-voting common stock. Pacific Ethanol’s business differs in important respects from that of Aventine, and, accordingly, the results of operations of the combined company and the market price of Pacific Ethanol common stock after the completion of the merger may be affected by factors different from those currently affecting the independent results of operations of each of Pacific Ethanol and Aventine. For a discussion of the businesses of Pacific Ethanol and Aventine and of certain factors to consider in connection with those businesses, see the risk factors included in this joint proxy statement/prospectus under the section entitled “Risk Factors—Related to Aventine’s Business” beginning on page 42, the documents incorporated by reference by Pacific Ethanol into this joint proxy statement/prospectus referred to under the section entitled “Where You Can Find More Information” beginning on page 257 and the description of Aventine’s business under the section entitled “The Companies—Aventine Renewable Energy Holdings, Inc.” beginning on page 56.

The issuance of shares of Pacific Ethanol common stock and non-voting common stock to Aventine stockholders in the merger will substantially dilute the interest in Pacific Ethanol held by Pacific Ethanol stockholders prior to the merger.

If the merger is completed, it is estimated that Pacific Ethanol will issue up to an aggregate of approximately 17,755,300 shares of Pacific Ethanol common stock and non-voting common stock upon the closing of the merger, assuming no exercise or conversion of outstanding options and warrants. Based on the number of shares of Pacific Ethanol common stock and Aventine common stock issued and outstanding on the Pacific Ethanol and Aventine record dates, Aventine stockholders before the merger will own, in the aggregate, approximately 42% of the aggregate number of shares of Pacific Ethanol common stock and non-voting common stock issued and outstanding immediately after the merger. The issuance of shares of Pacific Ethanol common stock and/or non-voting common stock to Aventine stockholders in the merger will cause a 42% reduction in the relative percentage interest of current Pacific Ethanol stockholders in the earnings, voting rights, liquidation value and book and market value of Pacific Ethanol. It is expected that Pacific Ethanol stockholders before the merger will hold approximately 58% of the total Pacific Ethanol common stock and non-voting common stock issued and outstanding immediately following completion of the merger. Thus, Pacific Ethanol stockholders before the merger will experience dilution in the amount of 42% as a result of the merger.

The unaudited pro forma combined condensed financial statements included in this document are preliminary and the actual financial condition and results of operations after the merger may differ materially.

The unaudited pro forma combined condensed financial statements in this joint proxy statement/prospectus are presented for illustrative purposes only and are not necessarily indicative of what Pacific Ethanol’s actual financial condition or results of operations would have been had the merger been completed on the dates indicated. The unaudited pro forma combined condensed financial statements reflect adjustments to illustrate the effect of the merger had it been completed on the dates indicated, which are based upon preliminary estimates, to record the Aventine identifiable assets acquired and liabilities assumed at fair value and the resulting goodwill recognized. The purchase price allocation for the merger reflected in this joint proxy statement/prospectus is preliminary, and final allocation of the purchase price will be based upon the actual purchase price and the fair value of the assets and liabilities of Aventine as of the date of the completion of the merger. Accordingly, the final acquisition accounting adjustments may differ materially from the pro forma adjustments reflected in this document. For more information, see “Unaudited Pro Forma Combined Condensed Financial Statements” beginning on page 229.

Failure to complete the merger could adversely affect Pacific Ethanol’s and Aventine’s stock prices and their future business and financial results.

Completion of the merger is subject to a number of conditions, including among other things, the receipt of approval of the Pacific Ethanol and Aventine stockholders. There is no assurance that the parties will receive the necessary approvals or satisfy the other conditions to the completion of the merger. Failure to complete the proposed merger will prevent Pacific Ethanol and Aventine from realizing the anticipated benefits of the merger. Each company will also remain liable for significant transaction costs, including legal, accounting and financial advisory fees, unless provided otherwise by the merger agreement. In addition, the market price of each company’s common stock may reflect various market assumptions as to whether the merger will occur. Consequently, the failure to complete the merger could result in a significant change in the market price of the common stock of Pacific Ethanol and Aventine.

Because certain directors and executive officers of Aventine, as the case may be, are parties to agreements or are participants in other arrangements that give them interests that may be different from, or in addition to, your interests as a stockholder of Aventine, these persons may have conflicts of interest in recommending that Aventine stockholders vote to adopt the merger agreement and approve the merger.

The directors and executive officers of Aventine, as the case may be, are parties to certain agreements or are participants in other arrangements that give them interests that may be different from, or in addition to, your interests as a stockholder of Aventine. This difference of interests stems from employment agreements covering certain executive officers under which such officers are entitled to severance payments, change of control payments and other benefits related to their employment resulting from the merger. In addition, Pacific Ethanol has an obligation under the merger agreement to indemnify Aventine’s directors and executive officers for acts or omission occurring prior to the effective time of the merger. The merger agreement also provides that Aventine will purchase “tail” officers’ and directors’ liability insurance policies on terms and conditions reasonably comparable to Aventine’s existing directors’ and officers’ liability insurance. The interests of the directors and executive officers of Aventine in the merger that are different than those of the Aventine stockholders are described under “Additional Interests of Certain of Aventine’s Directors and Executive Officers in the Merger” beginning on page 205.

Termination of the merger agreement could negatively impact Aventine or Pacific Ethanol.

If the merger agreement is terminated, there may be various consequences. For example, Aventine’s or Pacific Ethanol’s businesses may have been impacted adversely by the failure to pursue other beneficial opportunities due to the focus of management on the merger, without realizing any of the anticipated benefits of completing the merger. Additionally, if the merger agreement is terminated, the market price of Aventine’s or Pacific Ethanol’s common stock could decline to the extent that the current market prices of Pacific Ethanol common stock and Aventine common stock reflect a market assumption that the merger will be completed. If the merger agreement is terminated under certain circumstances, Aventine or Pacific Ethanol may be required to pay to the other party a termination fee of $5,982,000 or an expense reimbursement amount of up to $1,994,000. The termination rights and related fees are described under “The Merger Agreement and Related Agreements—Termination Fee and Expenses” beginning on page 226.

The merger agreement contains provisions that could discourage a potential alternative acquirer that might be willing to pay more to acquire Aventine.

The merger agreement contains “no shop” provisions that restrict Aventine’s ability to solicit or facilitate proposals regarding a merger or similar transaction with another party. Further, there are only limited exceptions to Aventine’s agreement that its board of directors will not withdraw or adversely qualify its recommendation regarding the merger agreement. Under certain circumstances, the Aventine Board is permitted to terminate the merger agreement in response to an unsolicited third party proposal to acquire Aventine, which the Aventine Board determines to be more favorable than the merger with Pacific Ethanol. However, if Aventine or Pacific Ethanol terminates the merger agreement because Aventine has received and accepted an acquisition proposal that is deemed more favorable by the Aventine Board, Pacific Ethanol will be entitled to collect a $5,982,000 termination fee from Aventine. We describe these provisions under “The Merger Agreement and Related Agreements—Termination” and “—Termination Fee and Expenses” beginning on pages 225 and 226, respectively.

These provisions could discourage a potential third party acquirer from considering or proposing an alternative acquisition, even if it were prepared to pay consideration with a higher value than that proposed to be paid in the merger, or might result in a potential third party acquirer proposing to pay a lower per share price than it might otherwise have proposed to pay because of the added expense of the termination fee.

Obtaining required approvals necessary to satisfy the conditions to the completion of the merger may delay or prevent completion of the merger.

To complete the merger, Pacific Ethanol stockholders must approve the issuance of shares of Pacific Ethanol common stock and non-voting common stock and the amendment of its Certificate of Incorporation and holders of at least 66-2/3% of Pacific Ethanol Series B Preferred Stock must agree not to treat the merger as a liquidation, dissolution or winding up within the meaning of the Pacific Ethanol Series B Certificate of Designations, each as contemplated by the merger agreement, and Aventine stockholders must adopt the merger agreement and approve the merger. In addition, the completion of the merger is conditioned upon the receipt of certain governmental authorizations, consents, orders or other approvals, including the expiration or termination of the waiting period under the HSR Act. On February 18, 2015, the FTC granted early termination of the waiting period under the HSR Act.

Pacific Ethanol and Aventine intend to pursue all required approvals in accordance with the merger agreement. No assurance can be given that the required approvals will be obtained and, even if all such approvals are obtained, no assurance can be given as to the terms, conditions and timing of the approvals or that they will satisfy the terms of the merger agreement. See the sections entitled “The Merger Agreement and Related Agreements—Conditions to the Completion of the Merger” and “The Proposed Merger—Regulatory Matter Relating to the Merger” beginning on pages 222 and 201, respectively, for a discussion of the conditions to the completion of the merger.

The shares of Pacific Ethanol common stock and/or non-voting common stock to be received by Aventine stockholders receiving the stock consideration as a result of the merger will have different rights from shares of Aventine common stock.

Following completion of the merger, Aventine stockholders will no longer be stockholders of Aventine but will instead be stockholders of Pacific Ethanol. Although Aventine and Pacific Ethanol are each incorporated under Delaware law, there will be important differences between the current rights of Aventine stockholders and the rights of Pacific Ethanol stockholders, including the rights of holders of Pacific Ethanol common stock and non-voting common stock that may be important to Aventine stockholders. See “Comparison of Rights of Pacific Ethanol and Aventine Stockholders” beginning on page 245 for a discussion of the material differences between the rights associated with Aventine common stock and Pacific Ethanol common stock and non-voting common stock.

The fairness opinion received by the Pacific Ethanol Board from Craig-Hallum does not reflect changes in circumstances subsequent to the date of the fairness opinion.

Craig-Hallum delivered to the Pacific Ethanol Board its opinion dated December 29, 2014. The opinion does not speak as of the time the merger will be completed or any date other than the date of such opinion. The opinion does not reflect changes that may occur or may have occurred after the date of the opinion, including changes to the operations and prospects of Aventine or Pacific Ethanol, changes in general market and economic conditions or regulatory or other factors including, among others, any adverse result in the Aurora Coop Litigation. Any such changes may materially alter or affect the relative values of Aventine and Pacific Ethanol.

The fairness opinion received by the Aventine Board from Duff & Phelps, Aventine’s financial advisor, does not reflect changes in circumstances subsequent to the date of the fairness opinion.

Duff & Phelps, Aventine’s financial advisor in connection with the merger, delivered to the Aventine Board its opinion dated March 31, 2015. The opinion does not speak as of the time the merger will be completed or any date other than the date of such opinion. The opinion does not reflect changes that may occur or may have occurred after the date of the opinion, including changes to the operations and prospects of Aventine or Pacific Ethanol, changes in general market and economic conditions or regulatory or other factors including, among others, any adverse result in the Aurora Coop Litigation. Any such changes may materially alter or affect the relative values of Aventine and Pacific Ethanol.

If the IRS (or a court, in the event of an IRS challenge) determines that the merger does not qualify as a “reorganization” under Section 368(a) of the Code, Aventine stockholders would be fully taxed on the merger.

If the merger is not treated as a “reorganization” under Section 368(a) of the Code, then the merger will be a fully taxable transaction, and Aventine stockholders would be required to recognize all of the gain or loss on their exchange of Aventine shares for the consideration received in the merger. See the section entitled “The Proposed Merger—Material United States Federal Income Tax Consequences of the Merger” beginning on page 197 for a discussion of the tax treatment of Aventine stockholders.

Risks Related to Aventine’s Business

Aventine has significant indebtedness under a term loan facility. Aventine’s term loan facility and the revolving facility have substantial restrictions and affirmative covenants and Aventine may have difficulty obtaining additional credit (if needed), which could adversely affect Aventine’s operations.

As of December 31, 2014, Aventine had an aggregate of approximately $161 million in debt outstanding due primarily to a $140 million term loan facility (as amended, and as may be amended, supplemented or otherwise modified from time to time, sometimes referred to as the Term Loan Facility) with Citibank N.A., as administrative and collateral agent (sometimes referred to as the Term Loan Agreement).  In addition, Aventine has a $40 million revolving credit facility with Alostar Bank of Commerce as administrative agent (as amended, and as may be amended, supplemented or otherwise modified from time to time, sometimes referred to as the Revolving Facility), and has borrowed approximately $19 million as of December 31, 2014 under that facility. As a result of Aventine’s indebtedness, Aventine will use a portion of cash flow to pay interest and principal when due, which will reduce the cash available to finance Aventine’s operations and other business activities and could limit Aventine’s flexibility in planning for, or reacting to, changes in Aventine’s business and the industry in which Aventine operates.

Aventine’s indebtedness under the Term Loan Facility and the Revolving Facility restricts Aventine’s ability to engage in certain debt, dividend and equity activities.

Aventine is also required to comply with certain affirmative covenants. Aventine’s ability to comply with these restrictions and covenants in the future is uncertain and will be affected by the levels of its cash flow from Aventine’s operations and events or circumstances beyond Aventine’s control. Aventine’s failure to comply with any of the restrictions and covenants could result in an event of default, which, if it continues beyond any applicable cure periods, could cause all of Aventine’s existing indebtedness to be immediately due and payable. As of the date of this joint proxy statement/prospectus, Aventine is in compliance with the covenants of the Term Loan Agreement and Revolving Facility.

Aventine is currently engaged in litigation regarding the Aurora Coop’s option to purchase the Aurora West Facility.

Among other legal claims, the Aurora Coop has filed legal claims against Aventine asserting that it has the right, pursuant to an agreement between Aventine and the Aurora Coop, dated March 23, 2010, to exercise an option to acquire the 74 acres of land upon which Aventine’s Aurora, Nebraska 110 million gallon ethanol production facility (sometimes referred to as the Aurora West Facility) is located, together with the Aurora West Facility and all related improvements, for a purchase price of $16,500 per acre (or $1,221,000 in the aggregate). The Aurora Coop asserts that its contractual right to exercise this option arose on July 1, 2012 due to Aventine’s alleged failure to complete construction of the Aurora West Facility as of such date. Aventine disputes the allegations and claims asserted by the Aurora Coop, and Aventine denies the validity and effectiveness of the Aurora Coop’s exercise of its option to purchase the land on which the Aurora West Facility is located. Aventine has asserted in its legal filings that it has satisfied its contractual obligations with respect to the completion of the plant as of the required date. Aventine has advised that it will continue to vigorously defend against any assertion that the Aurora Coop has any right to repurchase the land or any improvements on the land. The action is currently pending in the United States District Court, Nebraska. If Aventine is unsuccessful in defending this litigation, a number of outcomes may occur, including, without limitation, the conveyance of the land on which the Aurora West Facility is located (together with the Aurora West Facility and all related improvements) to the Aurora Coop for a purchase price that is substantially below the fair market value of the land and the facility, which Aventine believes would be an inequitable resolution of this claim, together with an unspecified amount of damages to the Aurora Coop related to the income the Aurora Coop alleges that it could have generated if the land had been conveyed as of an earlier date. An adverse outcome in Aventine’s defense of this litigation, could materially adversely affect Aventine’s business, financial condition, and results of operations. See “The Companies—Aventine Renewable Energy Holdings, Inc.—Legal Proceedings.”

An affiliate of Aventine is currently engaged in a dispute in connection with its storage of surplus beet sugar and amounts allegedly owed by such affiliate.

In 2013, Aventine Renewable Energy, Inc., a wholly owned affiliate of Aventine (sometimes referred to as ARE, Inc.), purchased surplus beet sugar through a USDA program for Aventine’s operations. The Western Sugar Cooperative (sometimes referred to as Western Sugar) (among other entities) warehoused this surplus sugar. ARE, Inc. paid for the warehousing of this sugar from inception of the relationship. Western Sugar, however, subsequently asserted that certain penalty rates for the storage of this product should have applied despite the lack of an agreement to such rates by ARE, Inc. Aventine and ARE, Inc. had been attempting to resolve the matter short of formal litigation. On February 27, 2015, Western Sugar filed an action in the United States District Court, District of Colorado, seeking payment of the penalty storage fees as “expectation damages,” in the amount of approximately $8.6 million. Aventine considers these claims to be without merit and will aggressively defend against them. See “The Companies—Aventine Renewable Energy Holdings, Inc.—Legal Proceedings.”

Aventine may be unable to secure additional financing.

Aventine’s ability to arrange (in addition to the Revolving Facility and the Term Loan Facility) financing (including any extension or refinancing), and the cost of additional financing, are dependent upon numerous factors. Other factors affecting Aventine’s access to financing include:

Aventine may not be able to generate enough cash flow to meet its debt obligations.

Aventine expects its earnings and cash flow to vary significantly from year to year due to the volatile nature of its industry. As a result, the amount of debt Aventine can manage in some periods may not be appropriate for Aventine in other periods. Additionally, Aventine’s future cash flow may be insufficient to meet its debt obligations and commitments. Any insufficiency could negatively impact Aventine’s business. A range of economic, competitive, business and industry factors will affect Aventine’s future financial performance, and, as a result, Aventine’s ability to generate cash flow from operations, and to pay its debt. Many of these factors, such as ethanol prices, corn prices, economic and financial conditions in Aventine’s industry and the global economy or competitive initiatives of Aventine’s competitors are beyond Aventine’s control.

If Aventine does not generate enough cash flow from operations to satisfy its debt obligations, Aventine may have to undertake alternative financing plans, such as refinancing or restructuring its debt, selling assets, reducing or delaying capital investments or raising additional capital.

Aventine cannot make any assurances that undertaking alternative financing plans, if necessary, would allow Aventine to meet its debt obligations. Aventine’s inability to generate sufficient cash flow to satisfy debt obligations, or to obtain alternative financing, could materially and adversely affect Aventine’s business, financial condition, and results of operations.

Aventine’s business is dependent upon the availability and price of corn. Significant disruptions in the supply of corn will materially affect Aventine’s operating results. In addition, since Aventine cannot always pass on increases in corn prices to its customers, continued periods of historically high corn prices could also materially adversely affect its operating results.

The principal raw material Aventine uses to produce ethanol and ethanol by-products is corn. In general, higher corn prices produce lower profit margins and, therefore, represent unfavorable market conditions. This is especially true when market conditions do not allow Aventine to pass along increased corn costs to its customers.

The price of corn is influenced by general economic, market, and regulatory factors. These factors include weather conditions, farmer planting decisions, government policies, and subsidies with respect to agriculture and international trade and global demand and supply. The significance and relative impact of these factors on the price of corn is difficult to predict. Factors such as severe weather or crop disease could have an adverse impact on Aventine’s business because Aventine may be unable to pass on higher corn costs to its customers. Any event that tends to negatively impact the supply of corn will tend to increase prices and potentially harm Aventine’s business. The increasing ethanol capacity could boost demand for corn and result in increased prices for corn.

The market for natural gas is subject to market conditions that create uncertainty in the price and availability of the natural gas that Aventine utilizes in its manufacturing process.

Aventine relies upon third parties for its supply of natural gas which is consumed in the production of ethanol. The prices for and availability of natural gas are subject to volatile market conditions. These market conditions often are affected by factors beyond Aventine’s control such as weather conditions, overall economic conditions and foreign and domestic governmental regulation and relations. Significant disruptions in the supply of natural gas could temporarily impair Aventine’s ability to produce ethanol for its customers. Increases in natural gas prices or changes in Aventine’s natural gas costs relative to natural gas costs paid by competitors may adversely affect Aventine’s results of operations and financial condition.

Fixed price and gasoline related contracts for ethanol may be at a price level lower than the prevailing price.

At any given time, contract prices for ethanol may be at a price level different from the current prevailing price, and such a difference could materially adversely affect Aventine’s results of operations and financial condition.

Aventine may engage in hedging or derivative transactions which involve risks that can harm Aventine’s business.

In an attempt to minimize the effects of the volatility of the price of corn, natural gas, electricity and ethanol (sometimes referred to as commodities), Aventine may take economic hedging positions in the commodities. Economic hedging arrangements also expose Aventine to the risk of financial loss in situations where the other party to the hedging contract defaults on its contract or there is a change in the expected differential between the underlying price in the hedging agreement and the actual price of the commodities. Although Aventine attempts to link its economic hedging activities to sales plans and pricing activities, occasionally such hedging activities can themselves result in losses. As a result, Aventine’s results of operations may be adversely affected during periods in which corn and/or natural gas prices increase.

Changes in ethanol prices can affect the value of Aventine’s inventory which may significantly affect Aventine’s profitability.

Aventine’s inventory is valued based upon a weighted average of Aventine’s cost to produce ethanol and the price it pays for ethanol that it purchases from other producers. Changes, either upward or downward, in Aventine’s purchased cost of ethanol or Aventine’s production costs, will cause the inventory value to fluctuate from period to period, perhaps significantly. These changes in value flow through Aventine’s statement of operations as the inventory is sold and can significantly increase or decrease Aventine’s profitability.

The relationship between the sales price of Aventine’s by-products and the price it pays for corn can fluctuate significantly which may affect Aventine’s results of operations and profitability.

Aventine sells co-products and by-products from the ethanol production process in order to offset corn costs and increase profitability. Historically, sales prices for these co-products have tracked along with the price of corn. However, there have been occasions when the value of these co-products and by-products has lagged behind increases in corn prices. As a result, Aventine may occasionally generate less revenue from the sale of these co-products and by-products relative to the price of corn. In addition, several of Aventine’s co-products compete with similar products made from other plant feedstock. The cost of these other feedstocks may not rise as corn prices increase. Consequently, the price Aventine may receive for these products may not rise as corn prices rise, thereby lowering Aventine’s cost recovery percentage relative to corn.

Fluctuations in the demand for gasoline may reduce demand for ethanol.

Ethanol is marketed as an oxygenate to reduce vehicle emissions from gasoline, as an octane enhancer to improve the octane rating of gasoline with which it is blended, and as a fuel extender. As a result, ethanol demand has historically been influenced by the supply of and demand for gasoline. If gasoline demand decreases, Aventine’s ability to sell its product and Aventine’s results of operations and financial condition may be materially adversely affected.

Aventine sells ethanol primarily to the major oil companies and traders and therefore Aventine can from time to time be subject to a high degree of concentration of sales and accounts receivable.

Aventine sells ethanol to most of the major integrated oil companies and a significant number of large, independent refiners and petroleum wholesalers. Aventine’s trade receivables result primarily from Aventine’s ethanol marketing operations. As a general policy, collateral is not required for receivables, but customers’ financial condition and creditworthiness are evaluated regularly. If Aventine were to suddenly lose a major customer and not be able to replace that demand for product very quickly, it could have a material impact on Aventine’s sales and profitability.

Aventine is substantially dependent on its operational facilities and any operational disruption could result in a reduction of sales volumes and could cause Aventine to incur substantial expenditures.

As of December 31, 2014, the substantial majority of Aventine’s income was derived from the sale of ethanol and the related co-products/by-products that were produced at Aventine’s facilities. Aventine’s operations may be subject to significant interruption if any of Aventine’s facilities experiences a major accident or is damaged by severe weather or other natural disaster. In addition, Aventine’s operations may be subject to labor disruptions and unscheduled downtime, or other hazards inherent in Aventine’s industry. Some of those hazards may cause personal injury and loss of life, severe damage to or destruction of property, natural resources and equipment, pollution and environmental damage, clean-up responsibilities, and repairs to resume operations and may result in suspension or termination of operations and the imposition of civil or criminal penalties. As protection against these hazards, Aventine maintains property, business interruption and casualty insurance which Aventine believes is in accordance with customary industry practices, but Aventine cannot provide any assurance that this insurance will be adequate to fully cover the potential hazards described above or that Aventine will be able to renew this insurance on commercially reasonable terms or at all.

Risks associated with the operation of Aventine’s production facilities may have a material adverse effect on Aventine’s business.

Aventine’s revenue is dependent on the continued operation of Aventine’s various production facilities. The operation of production plants involves many risks including:

The occurrence of material operational problems, including but not limited to the above events, may have an adverse effect on the productivity and profitability of a particular facility, or to Aventine as a whole.

Aventine is attempting to establish a rail connection in conjunction with Burlington Northern Santa Fe Railroad Company.

Aventine is using its commercially reasonable efforts to complete all necessary arrangements, including engineering, design and contracting with the Burlington Northern Santa Fe Railroad Company (sometimes referred to as the BNSF) as promptly as practicable, in order to establish a new connection through the rail facilities of Aventine’s affiliate, Nebraska Energy, L.L.C. (sometimes referred to as NELLC), to the inner rail loop track belonging to Aventine’s Aurora West Facility along with the associated “diamond switch” crossing the exterior rail track loop (sometimes referred to as the Exterior Track Loop), along a path that lies entirely on land owned by NELLC or Aventine’s subsidiary, Aventine Renewable Energy – Aurora West, LLC, such that the Aurora West Facility will be able to ship ethanol by rail in unit trains and single cars. However, there are no guarantees that Aventine will be able to complete the rail connection on a certain schedule (or at all). If such connection is not obtained it could have an adverse effect on Aventine’s business, results of operations and financial condition.

The use and demand for ethanol and its supply are highly dependent on various federal and state legislation and regulation, and any changes in legislation or regulation could cause the demand for ethanol to decline or its supply to increase, which could have a material adverse effect on Aventine’s business, results of operations and financial condition.

Various federal and state laws, regulations and programs have led to increased use of ethanol in fuel. Among these regulations are the renewable fuel standard (sometimes referred to as the RFS), which requires an increasing amount of renewable fuels to be used in the United States each year and the federal “farm bill,” which establishes federal subsidies for agricultural commodities including corn, Aventine’s primary feedstock. These laws, regulations, and programs are regularly changing, and sections of the RFS currently are the subject of legal and political challenges. Federal and state legislators and environmental regulators could adopt or modify laws, regulations, or programs that could affect adversely the use of ethanol. For example, California’s Low Carbon Fuel Standard Program makes it difficult for corn-based ethanol produced in many Midwestern states to be used as a fuel in California.

Aventine may be adversely affected by environmental, health and safety laws, regulations and liabilities.

Aventine is subject to extensive federal, state and local environmental, health and safety laws, regulations and permit conditions (and interpretations thereof), including, among other things, those relating to the discharge of hazardous and other waste materials into the air, water, and ground, the generation, storage, handling, use, transportation and/or disposal of hazardous materials, and the health and safety of its employees. Compliance with these laws, regulations, and permits requires Aventine to incur significant capital and other costs, including costs to obtain and maintain expensive pollution control equipment. These regulations may also require Aventine to make operational changes to limit actual or potential impacts to the environment. A violation of these laws, regulations, or permit conditions can result in substantial administrative and civil fines and penalties, criminal sanctions, imposition of clean-up and site restoration costs and liens, suspension or revocation of necessary permits, licenses and authorizations and/or the issuance of orders enjoining or limiting Aventine’s current or future operations. In addition, environmental laws and regulations (and interpretations thereof) change over time, and any such changes, more vigorous enforcement policies or the discovery of currently unknown conditions may require substantial additional environmental expenditures.

In addition, the hazards and risks associated with producing and transporting Aventine’s products (such as fires, natural disasters, explosions, abnormal pressures, and spills) may result in releases of hazardous substances and other waste materials, and may result in claims from governmental authorities or third parties relating to actual or alleged personal injury, property damage, or damages to natural resources. Aventine maintains insurance coverage against some, but not all, potential losses associated with its operations. Aventine believes that its insurance is adequate for the industry, but losses could occur for uninsurable or uninsured risks or in amounts in excess of existing insurance coverage. The occurrence of events which result in significant personal injury or damage to Aventine’s property, natural resources or third parties that is not covered by insurance could have a material adverse impact on Aventine’s results of operations and financial condition.

Aventine depends on rail, truck, and barge transportation for delivery of corn to it and the distribution of ethanol to its customers.

Aventine depends on rail, truck, and barge transportation for delivery of corn to it and/or the distribution of ethanol and co-products to its customers. Ethanol is not currently distributed by pipeline. Although it is not anticipated that the current litigation with the Aurora Coop will have a material impact on Aventine’s transportation services, disruption from any other source to the timely supply of Aventine’s transportation services or increases in the cost of these services for any reason, including the availability or cost of fuel or railcars to serve Aventine’s facilities, regulations affecting the industry, or labor stoppages in the transportation industry, could have an adverse effect on its ability to distribute ethanol or other products to its customers, and could have a material adverse effect on Aventine’s financial performance.

Aventine, and some of its major customers, have unionized employees and could be adversely affected by labor disputes.

Some of Aventine’s employees and some employees of Aventine’s major customers are unionized.  At December 31, 2014, Aventine’s Pekin, Illinois wet mill production employees were unionized. The unionized employees are covered by a collective bargaining agreement between Aventine’s subsidiary, Aventine Renewable Energy, Inc., and the United Steel, Paper and Forestry, Rubber, Manufacturing, Energy, Allied Industry and Service Workers International Union, on behalf of Local 7-662 (sometimes referred to as the Union). Although Aventine has not had any prior experience with work stoppages by its employees, the collective bargaining agreement may not prevent a strike or work stoppage in the future, and any such work stoppage could have a material adverse effect on Aventine’s business, financial condition, and results of operations. There is no certainty that the current collective bargaining agreement will be extended or that a new collective bargaining agreement will be reached.

If Aventine is unable to attract and retain key personnel, its ability to operate effectively may be impaired.

Aventine’s ability to operate its business and implement strategies depends, in part, on the efforts of its executive officers and other key employees. Aventine’s management philosophy of cost-control means that it operates with a limited number of corporate personnel, and its commitment to a less centralized organization also places greater emphasis on the strength of local management. Aventine’s future success will depend on, among other factors, its ability to attract and retain qualified personnel, particularly executive and senior plant management. The loss of the services of any of Aventine’s key employees or the failure to attract or retain other qualified personnel could have a material adverse effect on its business or business prospects.

If Aventine’s internal computer network and applications suffer disruptions or fail to operate as designed, Aventine’s operations will be disrupted and its business may be harmed.

Aventine relies on network infrastructure and enterprise applications, and internal technology systems for its operational, marketing support and sales, and product development activities. The hardware and software systems related to such activities are subject to damage from earthquakes, floods, lightning, tornadoes, fire, power loss, telecommunication failures, and other similar events. They are also subject to acts such as computer viruses, physical or electronic vandalism or other similar disruptions that could cause system interruptions and loss of critical data, and could prevent Aventine from fulfilling its customers’ orders. Aventine has developed disaster recovery plans and backup systems to reduce the potentially adverse effects of such events, but there are no assurances such plans and systems would be sufficient. Any event that causes failures or interruption in Aventine’s hardware or software systems could result in disruption of its business operations, have a negative impact on its operating results, and damage Aventine’s reputation.

Aventine’s results of operations may be adversely affected by technological advances.

The development and implementation of new technologies may result in a significant reduction in the costs of ethanol production. Aventine cannot predict when new technologies may become available, the rate of acceptance of new technologies by its competitors or the costs associated with such new technologies. In addition, advances in the development of alternatives to ethanol, or corn ethanol in particular, could significantly reduce demand for or eliminate the need for ethanol, or corn ethanol in particular, as a fuel oxygenate or octane enhancer. 

Any advances in technology which require significant capital expenditures for Aventine to remain competitive or which otherwise reduce demand for ethanol will have a material adverse effect on Aventine’s results of operations and financial condition.

Risks Related to the Combined Company if the Merger is Completed

The failure to integrate successfully the businesses of Pacific Ethanol and Aventine in the expected timeframe would adversely affect the combined company’s future results following the completion of the merger.

The success of the merger will depend, in large part, on the ability of the combined company following the completion of the merger to realize the anticipated benefits from combining the businesses of Pacific Ethanol and Aventine. To realize these anticipated benefits, the combined company must successfully integrate the businesses of Pacific Ethanol and Aventine. This integration will be complex and time-consuming.

The failure to integrate successfully and to manage successfully the challenges presented by the integration process may result in the combined company’s failure to achieve some or all of the anticipated benefits of the merger.

Potential difficulties that may be encountered in the integration process include the following:

The combined company’s future results will suffer if the combined company does not effectively manage its expanded operations following the merger.

Following the merger, the size of the combined company’s business will be significantly larger than the current businesses of Pacific Ethanol and Aventine. The combined company’s future success depends, in part, upon its ability to manage this expanded business, which will pose substantial challenges for the combined company’s management, including challenges related to the management and monitoring of new operations and associated increased costs and complexity. Neither Pacific Ethanol nor Aventine can assure you that the combined company will be successful or that the combined company will realize the expected operating efficiencies, annual net operating synergies, revenue enhancements and other benefits currently anticipated to result from the merger.

The loss of key personnel could have a material adverse effect on the combined company’s business, financial condition or results of operations.

The success of the merger will depend in part on the combined company’s ability to retain key Pacific Ethanol and Aventine employees who continue employment with the combined company after the merger is completed. It is possible that these employees might decide not to remain with the combined company after the merger is completed. If these key employees terminate their employment, the combined company’s business activities might be adversely affected, management’s attention might be diverted from integrating Pacific Ethanol and Aventine to recruiting suitable replacements and the combined company’s business, financial condition or results of operations could be adversely affected. In addition, the combined company might not be able to locate suitable replacements for any such key employees who leave the combined company or offer employment to potential replacements on reasonable terms.

The success of the combined company will also depend on relationships with third parties and pre-existing customers of Pacific Ethanol and Aventine, which relationships may be affected by customer preferences or public attitudes about the merger. Any adverse changes in these relationships could adversely affect the combined company’s business, financial condition or results of operations.

The combined company’s success will be dependent on the ability to maintain and renew business relationships, including relationships with pre-existing customers of both Pacific Ethanol and Aventine, and to establish new business relationships. There can be no assurance that the business of the combined company will be able to maintain pre-existing customer contracts and other business relationships, or enter into or maintain new customer contracts and other business relationships, on acceptable terms, if at all. The failure to maintain important business relationships could have a material adverse effect on the business, financial condition or results of operations of the combined company.

The combined company will incur significant transaction and merger-related costs in connection with the merger.

Pacific Ethanol and Aventine expect to incur significant costs associated with completing the merger and combining the operations of the two companies. Although the exact amount of these costs is not yet known, Pacific Ethanol and Aventine estimate that these costs will be approximately $2.4 million in the aggregate. In addition, there may be unanticipated costs associated with the integration. Although Pacific Ethanol and Aventine expect that the elimination of duplicative costs and other efficiencies may offset incremental transaction and merger-related costs over time, these benefits may not be achieved in the near term or at all.

The combined company will record goodwill that could become impaired and adversely affect the combined company’s operating results.

The merger will be accounted for as an acquisition by Pacific Ethanol in accordance with accounting principles generally accepted in the United States. Under the acquisition method of accounting, the assets and liabilities of Aventine will be recorded, as of completion, at their respective fair values and added to those of Pacific Ethanol. The reported financial condition and results of operations of Pacific Ethanol issued after completion of the merger will reflect Aventine balances and results after completion of the merger, but will not be restated retroactively to reflect the historical financial position or results of operations of Aventine for periods prior to the merger. Following completion of the merger, the earnings of the combined company will reflect acquisition accounting adjustments. See “Unaudited Pro Forma Combined Condensed Financial Statements” beginning on page 229.

Under the acquisition method of accounting, the total purchase price will be allocated to Aventine’s tangible assets and liabilities and identifiable intangible assets based on their fair values as of the date of completion of the merger. The excess of the purchase price over those fair values will be recorded as goodwill. Pacific Ethanol and Aventine expect that the merger will result in the creation of goodwill based upon the application of the acquisition method of accounting. To the extent the value of goodwill or intangibles becomes impaired, the combined company may be required to incur material charges relating to such impairment. Such a potential impairment charge could have a material impact on the combined company’s operating results.

Pacific Ethanol’s ability to utilize net operating loss carryforwards and certain other tax attributes may be limited.

Federal and state income tax laws impose restrictions on the utilization of net operating loss (sometimes referred to as NOL) and tax credit carryforwards in the event that an “ownership change” occurs for tax purposes, as defined by Section 382 of the Code. In general, an ownership change occurs when stockholders owning 5% or more of a “loss corporation” (a corporation entitled to use NOL or other loss carryovers) have increased their ownership of stock in such corporation by more than 50 percentage points during any three-year period. The annual base limitation under Section 382 of the Code is calculated by multiplying the loss corporation’s value at the time of the ownership change by the greater of the long-term tax-exempt rate determined by the IRS in the month of the ownership change or the two preceding months.

As of December 31, 2014, Pacific Ethanol and Aventine had $28.3  million and $63.5 million, respectively, of NOLs that are currently limited in their annual use. As a result of the merger, it is possible that either or both Pacific Ethanol and Aventine will be deemed to have undergone an “ownership change” for purposes of Section 382 of the Code. Accordingly, the combined company’s ability to utilize Pacific Ethanol’s and Aventine’s net operating loss carryforwards may be substantially limited. These limitations could in turn result in increased future tax payments for the combined company, which could have a material adverse effect on the business, financial condition or results of operations of the combined company.

Aventine is currently engaged in litigation matters that may prevent the combined company from crossing the Exterior Track Loop and could require the combined company to purchase grain for the Aurora West Facility exclusively from the Aurora Coop.

Among other legal claims, the Aurora Coop has filed legal claims against Aventine alleging that Aventine (and two of its subsidiaries) is in breach of the parties’ grain and marketing and master development agreements (sometimes referred to as the Aurora Coop Grain Agreements). Aventine denies that it is in breach of the Aurora Coop Grain Agreements and maintains in a counterclaim that the Aurora Coop has breached the parties’ grain supply agreement (sometimes referred to as the Grain Supply Agreement) and the marketing agreement (sometimes referred to as the Marketing Agreement). As a result, Aventine issued notice of termination of the Grain Supply Agreement and the Marketing Agreement. The Aurora Coop seeks a judicial order declaring that Aventine is in breach of the Aurora Coop Grain Agreements and further declaring that Aventine’s termination of the Grain Supply Agreement and Marketing Agreement is ineffective. If Aventine is unsuccessful in this matter, the Grain Supply Agreement will not be terminated and, as a result, Aventine could be required to purchase grain for the Aurora West Facility exclusively from the Aurora Coop at a price higher than it otherwise may be able to negotiate. The inability to purchase corn for the Aurora West Facility on market terms could have a material adverse impact on the financial condition or results of operations of the combined company. On the other hand, if Aventine is successful in this matter, the Grain Supply Agreement and Marketing Agreement may be terminated. The termination of the Grain Supply Agreement, however, may trigger a termination provision in the parties’ Double Track Loop Easement and Use Agreement, thus terminating an easement allowing Aventine the use of the Exterior Track Loop (sometimes referred to as the Easement Agreement).

The Aurora Coop has also filed a suit against Aventine seeking a judicial declaration that Aventine’s right to use the Exterior Track Loop is terminated if the Grain Supply Agreement, which is the subject of the litigation referred to above, is terminated. As discussed above, Aventine has issued notice of termination of the Grain Supply Agreement. Aventine disputes the Aurora Coop’s assertion that its easement rights to use the Exterior Track Loop have been terminated or extinguished. The easement would allow Aventine to use the Exterior Track Loop and to access the BNSF line by crossing the Exterior Track Loop, but Aventine’s use of the easement is currently blocked pending the resolution of these matters. If, as a result of the above discussed matters, it is determined that the Grain Supply Agreement is terminated and that such termination triggers a termination of the Easement Agreement, Aventine will be prevented from using the Exterior Track Loop and accessing the BNSF line by crossing the Exterior Track Loop under the terms of the easement.

However, Aventine recently constructed a diamond switch on adjoining land owned by Aventine’s affiliate, NELLC. This diamond switch allows Aventine to move rail cars between the Aurora West Facility and the BNSF line by crossing the Exterior Track Loop on land owned by NELLC and, therefore, obviates the need for the easement granted under the Easement Agreement. The Aurora Coop sought a temporary restraining order to block Aventine’s construction and use of the diamond switch, which was denied by the Court, and the Aurora Coop is seeking to amend the above case to challenge Aventine’s construction and use of the diamond switch. If the Aurora Coop is permitted to bring such a claim and if Aventine is unsuccessful in defending this matter and if the Easement Agreement is terminated as a result of the proceedings surrounding the Grain Supply Agreement (as discussed above), Aventine would not be able to use the diamond switch or the easement, and thus would be unable to use the railroad to transport its products between the Aurora West Facility and the BNSF line. If Aventine is unable to use railroad transportation to access the BNSF line from the Aurora West Facility, it would be forced to use other means of transportation, such as truck transport, which would not be as effective and cost efficient as railroad transportation. Aventine’s inability to use railroad transportation could have a materially adverse impact on the financial condition or results of operations of the combined company. If, on the other hand, Aventine is successful in defending the action regarding the diamond switch but the Easement Agreement is terminated as a result of the proceedings surrounding the Grain Supply Agreement (as discussed above), the combined company’s ability to cross or use a portion of the Exterior Track Loop may nonetheless be limited by the courts. For example, even if the combined company is able to transfer single rail cars across between the Aurora West Facility and the BNSF line, it may be unable to transfer unit trains (i.e., trains comprised of 100 or more rail cars). Any significant restrictions on the combined company’s use of the diamond switch to cross the Exterior Track Loop could have a material adverse impact on the financial condition or results of operations of the combined company inasmuch as the combined company may not be able to capture the cost advantages and efficiencies of shipping products in the larger conveyance format. See “The Companies—Aventine Renewable Energy Holdings, Inc.—Legal Proceedings.”

The combined company’s indebtedness following the merger will be greater than Pacific Ethanol’s existing indebtedness. Therefore, it may be more difficult for the combined company to pay or refinance its debts and the combined company may need to divert its cash flow from operations to debt service payments. The additional indebtedness could limit the combined company’s ability to pursue other strategic opportunities and increase its vulnerability to adverse economic and industry conditions.

In connection with the merger, the combined company will also be responsible for Aventine’s outstanding debt. Pacific Ethanol’s total indebtedness as of December 31, 2014 was approximately $34.5 million. Pacific Ethanol’s pro forma total consolidated indebtedness as of December 31, 2014, after giving effect to the merger, would have been approximately $192.2 million (all of which would be non-current). The combined company’s debt service obligations with respect to this increased indebtedness could have an adverse impact on its earnings and cash flows, which after the merger would include the earnings and cash flows of Aventine, for as long as the indebtedness is outstanding.

The combined company’s increased indebtedness could also have important consequences to holders of Pacific Ethanol common stock. For example, it could:

Based upon current levels of operations, management of Pacific Ethanol and Aventine expect the combined company to be able to generate sufficient cash on a consolidated basis to make all of the principal and interest payments when such payments are due under its existing credit facilities, indentures and other instruments governing their outstanding indebtedness, and the indebtedness of Aventine that may remain outstanding after the merger, but there can be no assurance that the combined company will be able to repay or refinance such borrowings and obligations.

The merger may not be accretive, and may be dilutive, to Pacific Ethanol’s earnings per share, which may negatively affect the market price of Pacific Ethanol common stock.

Although the merger is expected to be accretive to earnings per share, the merger may not be accretive, and may be dilutive, to Pacific Ethanol’s earnings per share. The expectation that the merger will be accretive is based on preliminary estimates that may materially change. In addition, future events and conditions could decrease or delay any accretion, result in dilution or cause greater dilution than may be expected, including:

Any dilution of, or decrease or delay of any accretion to, Pacific Ethanol’s earnings per share could cause the price of Pacific Ethanol’s common stock to decline.

Business issues currently faced by one company may be imputed to the operations of the other company or the combined company.

To the extent that either Pacific Ethanol or Aventine currently has or is perceived by customers to have operational challenges, those challenges may raise concerns by existing customers of the other company following the merger which may limit or impede Pacific Ethanol’s future ability to maintain relationships with those customers.

Resales of shares of Pacific Ethanol common stock following the merger and additional obligations to issue shares of Pacific Ethanol common stock may cause the market price of Pacific Ethanol common stock to decrease.

As of May 1, 2015, Pacific Ethanol had 24,658,394 shares of common stock issued and outstanding and approximately 1,689,963 shares of common stock subject to outstanding options, warrants and other rights to purchase or acquire its shares, including the rights of holders of Pacific Ethanol Series B Preferred Stock to convert shares of Series B Preferred Stock into shares of Pacific Ethanol common stock. Pacific Ethanol currently estimates that it will issue up to an aggregate of approximately 17,755,300 shares of Pacific Ethanol common stock and non-voting common stock upon the closing of the merger, assuming no exercise or conversion of outstanding options and warrants. A majority of the newly issued shares are subject to stockholders agreements entered into by Pacific Ethanol and certain stockholders of Aventine prohibiting the sale of the shares of Pacific Ethanol issued in connection with the merger for various periods of time. The issuance of these new shares of Pacific Ethanol common stock and non-voting common stock, and the sale of these new shares of common stock (including shares of common stock issuable upon conversion of shares of non-voting common stock issued in the merger) by current Aventine stockholders (i) after the merger, for those Aventine stockholders not subject to the stockholders agreements, or (ii) after applicable restrictive periods have passed for those Aventine stockholders subject to the stockholders agreements, could have the effect of depressing the market price for shares of Pacific Ethanol common stock. In addition, the issuance of Pacific Ethanol common stock upon exercise of outstanding Pacific Ethanol options and warrants or upon conversion of Pacific Ethanol Series B Preferred Stock could also have the effect of depressing the market price for shares of Pacific Ethanol common stock.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

The statements in this joint proxy statement/prospectus and the documents incorporated by reference herein that are not historical statements, including statements regarding the expected timetable for completing the merger, benefits and synergies of the merger, future opportunities for the combined company and products, future financial performance and any other statements regarding Pacific Ethanol’s and Aventine’s future expectations, beliefs, plans, objectives, financial conditions, assumptions or future events or performance that are not historical facts, are forward-looking statements within the meaning of the federal securities laws. These statements are subject to numerous risks and uncertainties, many of which are beyond the companies’ control, which could cause actual results to differ materially from the results expressed or implied by the statements. These risks and uncertainties include, but are not limited to: failure to obtain the required votes of Pacific Ethanol’s or Aventine’s stockholders; the timing to consummate the merger; the risk that conditions to closing of the merger may not be satisfied or the closing of the merger may otherwise not occur; the risk that a regulatory approval that may be required for the merger is not obtained or is obtained subject to conditions that are not anticipated; the diversion of management time on transaction-related issues; the ultimate timing, outcome and results of integrating the operations of Pacific Ethanol and Aventine and the ultimate outcome of Pacific Ethanol’s operating efficiencies applied to Aventine’s products and services; the effects of the business combination of Pacific Ethanol and Aventine, including the combined company’s future financial condition, results of operations, strategy and plans; expected synergies and other benefits from the merger and the ability of Pacific Ethanol to realize such synergies and other benefits; expectations regarding regulatory approval of the transaction; the possibility that Pacific Ethanol and Aventine may not be able to maintain relationships with their employees, suppliers or customers as a result of the uncertainty surrounding the merger; direct or indirect effects on the combined company’s business, financial condition or liquidity resulting from a change in its credit rating or the credit ratings of its counterparties or competitors; results of litigation, settlements and investigations; actions by third parties, including governmental agencies; changes in the demand for or price of ethanol can be significantly impacted by weakness in the worldwide economy; consequences of audits and investigations by government agencies and legislative bodies and related publicity and potential adverse proceedings by such agencies; protection of intellectual property rights and against cyber attacks; compliance with environmental laws; changes in government regulations and regulatory requirements, particularly those related to the production of ethanol; compliance with laws related to income taxes and assumptions regarding the generation of future taxable income; structural changes in the ethanol industry; maintaining a highly skilled workforce; availability and cost of raw materials; and integration of acquired businesses and operations of joint ventures.

Any forward-looking statements should be considered in light of such important factors. Pacific Ethanol and Aventine undertake no obligation to revise or update publicly any forward-looking statements for any reason. Readers are cautioned not to place undue reliance on any forward-looking statement, which speaks only as of the date on which such statement is made or in the case of documents incorporated by reference, as of the date of the document incorporated by reference.

All subsequent written and oral forward-looking statements concerning the merger or other matters addressed in this joint proxy statement/prospectus and attributable to Pacific Ethanol, Aventine or any person acting on their behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this joint proxy statement/prospectus.

The Companies

Pacific Ethanol, Inc.

Pacific Ethanol is the leading producer and marketer of low-carbon renewable fuels in the Western United States. Pacific Ethanol produces and markets all the ethanol produced by the Pacific Ethanol Plants, markets all the ethanol produced by two other ethanol producers in California and markets ethanol purchased from other third-party suppliers throughout the United States. Pacific Ethanol markets ethanol through its subsidiary, Kinergy, and ethanol co-products, including WDG, a nutritious animal feed, and corn oil, for the Pacific Ethanol Plants.

Pacific Ethanol has extensive customer relationships throughout the Western United States. Its ethanol customers are integrated oil companies and gasoline marketers who blend ethanol into gasoline. Pacific Ethanol arranges for transportation, storage and delivery of ethanol purchased by its customers through its agreements with third-party service providers in the Western United States, primarily in California, Arizona, Nevada, Utah, Oregon, Colorado, Idaho and Washington. WDG customers are dairies and feedlots located near the Pacific Ethanol Plants. Corn oil is sold to poultry and biodiesel customers.

Pacific Ethanol has extensive supplier relationships throughout the Western and Midwestern United States. In some cases, it has marketing agreements with suppliers to market all of the output of their facilities.

Pacific Ethanol was founded in February 2005, is incorporated under the laws of the State of Delaware and is headquartered in Sacramento, California. Pacific Ethanol has ethanol production facilities located in Stockton, California, Madera, California, Burley, Idaho and Boardman, Oregon.

Additional information about Pacific Ethanol and its subsidiaries is included in documents incorporated by reference in this joint proxy statement/prospectus. See “Where You Can Find More Information” beginning on page 257.

AVR Merger Sub, Inc.

Merger Sub, a wholly-owned subsidiary of Pacific Ethanol, is a Delaware corporation formed on December 29, 2014 for the sole purpose of effecting the merger. Upon completion of the merger, Merger Sub will merge with and into Aventine, with Aventine surviving as a wholly-owned subsidiary of Pacific Ethanol after the merger.

Aventine Renewable Energy Holdings, Inc.  

Aventine has been engaged in the production and marketing of corn-based fuel-grade ethanol in the United States since 1981. Aventine markets and distributes ethanol to many of the leading energy and trading companies in the United States. Aventine’s facilities also produce several co-products while producing ethanol, such as distillers grain, corn gluten meal and feed, corn oil, corn germ and grain distillers dried yeast. Aventine markets these co-products primarily to livestock producers and other end users as a substitute for corn and other sources of starch and protein.

Founded in 2003, Aventine is incorporated in Delaware. Its main office is located in Pekin, Illinois and it has operations in Pekin, Illinois and Aurora, Nebraska.

Aventine owns and operates a corn wet milling plant in Pekin, Illinois, that produces approximately 100 million gallons of ethanol on an annual basis. In addition, Aventine owns and operates a dry milling plant in Pekin, Illinois, that produces approximately 60 million gallons of ethanol on an annualized basis. In addition, Aventine owns and operates two dry milling plants in Aurora, Nebraska, that produce approximately 155 million gallons of ethanol annually. Aventine also owns a dry milling facility in Canton, Illinois, that has a nameplate capacity of 38 million gallons of ethanol per year, but is currently idled.

Business Overview

Today, Aventine derives its revenue primarily from the sale of ethanol and co-products produced at its plants.  

Ethanol Production

Aventine owns and operates a corn wet milling plant in Pekin, Illinois (sometimes referred to as the Pekin wet mill). The Pekin wet mill produces approximately 100 million gallons of ethanol on an annual basis. In addition, Aventine owns and operates a dry milling plant in Pekin, Illinois (sometimes referred to as the Pekin dry mill). The Pekin dry mill produces approximately 60 million gallons of ethanol on an annualized basis. Together, the Pekin wet mill and Pekin dry mill are sometimes collectively referred to as the Pekin facilities. In addition, Aventine owns and operates two dry milling plants in Aurora, Nebraska (sometimes referred to as the Aurora facilities). These facilities produce approximately 155 million gallons of ethanol annually. Aventine also owns a dry milling facility in Canton, Illinois (sometimes referred to as the Canton facility). The Canton facility has a nameplate capacity of 38 million gallons of ethanol per year, but is currently idled. 

As typical in Aventine’s industry, Aventine’s ethanol plants are set up to operate 24 hours per day, every day of the fiscal year. Occasionally, Aventine’s ethanol facilities experience outages (both planned and unplanned) in order to perform routine maintenance (on average, approximately one week per plant each year). Aventine’s ethanol plants may also experience unplanned outages for various reasons. Unplanned outages are generally short-term in nature due to the negative impacts unplanned outages have on Aventine’s production efficiencies and related profits.

Products

Aventine generates revenue from the following products:

Ethanol

Aventine’s principal product is fuel-grade ethanol, an alcohol which is derived principally from corn.  Ethanol is sold primarily for blending with gasoline to meet mandates for the required consumption and use of biofuels, as an octane enhancer, as an oxygenate additive for the purpose of meeting fuel emission standards, and as a fuel extender.

Co-Products

Additional revenue is generated through the sale of co-products. The volume and portfolio of co-products produced varies with the level of ethanol production achieved and production process used.  In addition, the mix of these co-products can be shifted to increase revenues.  Co-product revenue is driven by both the quantity of by-products produced and the market price received for co-products. 

In the wet milling process, the remaining parts of the grain are processed into a number of different forms of protein used to feed livestock.  The multiple co-products from Aventine’s Pekin wet mill generates a higher level of cost recovery from corn than the principal co-product (dried distillers grains with solubles (sometimes referred to as DDGS)) at Aventine’s dry milling facilities in Illinois and Nebraska.

The Pekin wet mill co-product portfolio includes several products that are used in animal feed ingredients, such as corn gluten feed (both wet and dry), corn gluten meal, and corn distillers with solubles (sometimes referred to as CCDS). Corn germ is produced and sold at the Pekin wet mill as corn oil for human consumption. Aventine’s Pekin wet mill also produces grain distillers dried yeast which is sold primarily as a protein additive in the animal and pet food industry, and a Kosher and Chametz free grain distillers dried yeast, which is processed into a growing variety of products for use in animal and human food and fermentation applications. Carbon dioxide produced by the Pekin Wet mill is used in beverage carbonation and dry ice production. 

The dry mill facilities in Pekin, Illinois and Aurora, Nebraska produce DDGS, wet distillers grains with soluble (sometimes referred to as WDGS), and corn oil as co-products.  These are sold for various consumer uses into large commodity markets. DDGS and WDGS are sold as a feed product to be included in livestock feed rations. Corn oil is produced at Aventine’s Pekin dry mill and used in the biodiesel industry.

Customers

Some of Aventine’s customers have purchased ethanol from Aventine for over ten years. For the year ended December 31, 2014, Aventine’s ten largest customers accounted for approximately 59% of Aventine’s consolidated revenue.

Pricing

Ethanol is generally sold through short-term contracts based upon indexed or fixed prices. Co-products are generally sold through short-term contracts based upon fixed prices.

Raw Materials and Suppliers

Aventine’s principal raw material is #2 yellow corn.  Corn requirements are contracted through a variety of sources, including farmers, grain elevators, and gain cooperatives. Due to the Midwest location of Aventine’s ethanol facilities, Aventine has ample access to various corn markets and suppliers.

The key elements of Aventine’s corn procurement strategies are the assurance of a stable supply and the avoidance, where possible, of significant exposures to corn price fluctuations. Corn prices fluctuate daily, typically using the Chicago Board of Trade price as a benchmark.  Corn is delivered to the facilities via truck and railcars through local distribution networks.

Utilities

The production of ethanol requires the use of natural gas and coal at Aventine’s facilities.  From time to time, Aventine uses a combination of forward purchases and financial hedge positions to minimize the effects of the volatility of the price of natural gas. Aventine’s Pekin wet mill employs steam turbines to produce Aventine’s own electricity. Due to new air quality standards, Aventine is in the process of replacing its coal equipment with natural gas. The result of this conversion will decrease Aventine’s energy consumption and increase Aventine’s operating efficiency.

Employees

At December 31, 2014, Aventine had a total of 295 full-time equivalent employees. Approximately 46% of the current full-time employees (comprised of the hourly employees at the Pekin, Illinois facilities) are represented by the Union. The unionized employees are covered by a collective bargaining agreement between Aventine’s subsidiary, Aventine Renewable Energy, Inc., and the Union. The contract with the Union is scheduled to expire on October 31, 2015.

Competitive Strengths

Aventine’s competitive strengths include the following:

Competition

Aventine operates in a highly competitive ethanol marketing and production industry. The top ten producers, of which Aventine is one, accounted for approximately 50% of total industry capacity. All of the top ten producers have annual production capacity exceeding 200 million gallons per year.  The largest ethanol producer’s share of domestic capacity was approximately 12% in 2014. According to the Renewable Fuels Association (sometimes referred to as the RFA), the United States leads the world in ethanol production with 210 bio-refineries in 28 states across the country as of December 2014.

Historically, the world’s ethanol producers have competed primarily on a regional basis.  Imports into the United States were generally limited by an import tariff (other than from Caribbean basin countries which were exempt from this tariff up to specified limits).  This tariff expired on December 31, 2011.  In recent years, Aventine has faced competition from foreign producers.  Brazil is the world’s second largest ethanol producer.  Brazil makes ethanol primarily from sugarcane, a process which has historically been lower in cost than producing ethanol from corn.  Several large companies produce ethanol in Brazil.

Business and Growth Strategies

Aventine has been pursuing the following business and growth strategies:

Legal Proceedings

Aventine is subject to legal proceedings, claims and litigation arising in the ordinary course of business, including those described in further detail below. Aventine cannot predict the outcome of such matters or estimate the possible loss or range of loss, if any, because of considerable uncertainties that exist. Therefore, it is possible that the outcome of those legal proceedings, claims and litigation could adversely affect Aventine’s financial condition, results of operations or cash flows when resolved in a future period.

Aurora Coop—Option Dispute

On May 29, 2012, Aventine commenced suit against the Aurora Coop, seeking declaratory relief. That suit alleged the Aurora Coop had improperly threatened to invoke a purported option to acquire the land upon which the Aurora West Facility is located. The Aurora Coop then filed legal claims against Aventine, on June 21, 2012, which were removed to and now are pending in the United States District Court for the District of Nebraska (Case No. 4:12-cv-00230), asserting that it has the right, pursuant to an agreement between Aventine and the Aurora Coop, dated March 23, 2010, to exercise an option to acquire the 74 acres of land upon which the Aurora West Facility is located, together with the Aurora West Facility and all related improvements, for a purchase price of $16,500 per acre (or $1,221,000 in the aggregate). The Aurora Coop asserts that its contractual right to exercise this option arose on July 1, 2012 due to Aventine’s alleged failure to complete construction of the Aurora West Facility as of such date and to operate at a certain rate of production. The Aurora Coop seeks a judicial order requiring Aventine to convey the Aurora West Facility and the land upon which the Aurora West facility is located to the Aurora Coop for the purchase price of set forth above. The Aurora Coop also seeks a judicial order imposing a constructive trust and requiring Aventine to account for and pay to the Aurora Coop the greater of the profits which Aventine received or may have received in the exercise of reasonable care in the operation of the Aurora West Facility after July 1, 2012. That is, the Aurora Coop also seeks an order requiring Aventine to pay an unspecified amount of damages to compensate the Aurora Coop for damages it allegedly suffered as a result of Aventine’s purported delay in conveying title to the Aurora West Facility and the land upon which it is located. Aventine disputes the allegations and claims asserted by the Aurora Coop, and Aventine denies the validity and effectiveness of the Aurora Coop’s exercise of its option to purchase the land on which the Aurora West Facility is located. Aventine has asserted in its legal filings that it has satisfied its contractual obligations with respect to the completion of the plant as of the required date. The parties are currently engaged in extensive discovery. Aventine will continue to vigorously defend against any assertion that the Aurora Coop has any right to repurchase the land or any improvements on the land.

Aurora Coop—Grain Procurement Dispute

On September 20, 2012, the Aurora Coop filed a suit in the United States District Court for the District of Nebraska (Case No.4:12-cv-3200), naming Aventine as a defendant, alleging that Aventine (and two of its subsidiaries) breached the parties’ Aurora Coop Grain Agreements. Specifically, the Aurora Coop alleges that it procured 1.7 million bushels of corn on Aventine’s behalf, for which Aventine is liable in a gross amount of approximately $2 million. Aventine denies that it ever contracted for the corn in question or that the Aurora Coop suffered the alleged losses and maintains in its counterclaim that the Aurora Coop improperly set off approximately $400,000 it owes to Aventine (or one or more of its subsidiaries) in violation of the parties’ Aurora Coop Grain Agreements, resulting in uncured breaches of each such agreement. As a result, Aventine issued notice of termination of the Grain Supply Agreement and the Marketing Agreement. The Aurora Coop seeks a judicial order declaring that Aventine is in breach of the parties’ Aurora Coop Grain Agreements and further declaring that Aventine’s termination of the parties’ Grain Supply Agreement is ineffective. The Aurora Coop further seeks a judicial order requiring Aventine to abide by the Aurora Coop Grain Agreements and prohibit Aventine from procuring grain for the Aurora West Facility from any source other than the Aurora Coop or marketing co-products through anyone other than the Aurora Coop. Previously, the claims relating to the alleged purchases of grain by the Aurora Coop and Aventine’s counterclaims for the amounts improperly set off were submitted to arbitration before the National Grain and Feed Association, where an arbitration panel found in favor of Aventine in all material respects. The Aurora Coop is appealing the arbitration panel’s decision. Aventine intends to pursue any and all rights and remedies available to it with respect to the foregoing.

Aurora Coop—Rail Loop Dispute

On February 4, 2014, the Aurora Coop filed a suit against Aventine in the United States District Court for the District of Nebraska (Case No. 4:14-cv-3032). The Aurora Coop seeks a judicial declaration regarding the alleged termination of Aventine’s easement rights relating to the use of the Exterior Track Loop surrounding the Aurora West Facility. Aventine was granted an easement to use the Exterior Track Loop through an agreement with the Aurora Coop entitled the Double Track Loop Easement and Use Agreement. The Aurora Coop asserts that Aventine’s right to use the Exterior Track Loop is terminated if the parties’ Grain Supply Agreement, which is the subject of the litigation referred to above, is terminated. Aventine disputes the Aurora Coop’s assertion that its easement rights to use the Exterior Track Loop have been terminated or extinguished. Aventine has implemented alternative means to avoid the use of the Exterior Track Loop through the construction and use of a diamond crossover track which is used to transport rail cars between the Aurora West Facility and the BNSF main line presently. This action is currently pending, and Aventine intends to assert all of its rights and defenses available to it with respect to the foregoing.

Aurora Coop – Summary of Disputes

The primary disputed issues arising from the pending lawsuits include the following:

The legal claims affecting the Aurora Coop’s right to repurchase the Aurora West Facility will turn on the validity and effectiveness of the Aurora Coop’s exercise of its option to repurchase the land on which the Aurora West Facility is located and the improvements thereon. The factual issue impacting the resolution of this claim is whether the construction of the Aurora West Facility was “complete” by the option exercise date of July 1, 2012.

If the Aurora Coop prevails on its option exercise claim, it may be permitted to repurchase the land on which the Aurora West Facility is located and the improvements thereon, including the Aurora West Facility at the option exercise price of $1,221,000.

If the Aurora Coop prevails on its option exercise claim, the related legal claims concerning the Grain Supply Agreement and easements concerning the Aurora West Facility may become irrelevant if the Aurora Coop is permitted to repurchase the land on which the Aurora West Facility is located and the improvements thereon. If the Aurora Coop’s option exercise claim is denied by the court, the related easement and grain supply claims may affect the operation of the Aurora West Facility.

There may be two primary issues arising from these lawsuits surrounding the easement and grain supply claims: (i) whether Aventine will be required to purchase grain for the Aurora West Facility exclusively from the Aurora Coop; and (ii) whether Aventine will be able to access or cross the Exterior Track Loop to move its rail cars between the Aurora West Facility and the BNSF main line. Both Aventine and the Aurora Coop claim that the other party breached the Grain Supply Agreement and the Marketing Agreement by failing to pay for certain amounts due under those agreements. Aventine asserts that each of the Grain Supply Agreement and the Marketing Agreement has been terminated by the Aurora Coop’s breach. These claims were submitted to arbitration with the National Grain and Feed Association and are also the subject of a lawsuit which has been largely stayed pending the arbitration.

Aventine prevailed in the National Grain and Feed Association arbitration and the Aurora Coop is now appealing that decision. If the arbitration decision is upheld, Aventine’s termination of the Grain Supply Agreement will likely be deemed valid and effective. The termination of the Grain Supply Agreement may affect the operation of the Aurora West Facility in two primary ways. First, Aventine will not be required to purchase the grain for the Aurora West Facility exclusively from the Aurora Coop. Second, the termination of the Grain Supply Agreement may trigger a termination provision in the Easement Agreement preventing Aventine from accessing the Exterior Track Loop to transfer rail cars between the Aurora West Facility and the main BNSF line. This result may prevent or severely limit Aventine from using the railroad to transport its products. However, Aventine recently constructed a diamond switch crossing the Exterior Track Loop on adjoining land owned by Aventine’s affiliate, NELLC. This diamond switch allows Aventine to move its rail cars between the Aurora West Facility and the BNSF line. The Aurora Coop has sought permission to file a legal challenge to Aventine’s construction and use of the diamond switch. This action is currently pending and the ultimate resolution of this legal claim may impact the operations of the Aurora West Facility.

Western Sugar Cooperative

On February 27, 2015, Western Sugar filed suit against ARE, Inc. in the United States District Court for the District of Colorado (Case No.1:15-cv-00415), claiming that it was owed penalty rates for storage of surplus beet sugar. Western Sugar is seeking payment of approximately $8.6 million in penalty storage fees as “expectation damages.” In 2013, ARE, Inc. purchased surplus beet sugar through a USDA program for Aventine’s operations. Western Sugar (among other entities) warehoused this surplus sugar. ARE, Inc. paid for the warehousing of this sugar from inception of the relationship. Western Sugar, however, subsequently asserted that certain penalty rates for the storage of this product should have applied despite the lack of an agreement to such rates by ARE, Inc. Aventine and ARE, Inc. had been attempting to resolve this matter short of formal litigation prior to Western Sugar’s filing of the suit. Aventine considers these claims to be without merit and will aggressively defend against them.

In addition to those items disclosed above, Aventine is presently a party to additional litigation with the Aurora Coop, and may, from time to time, be subject to claims and suits arising in the ordinary course of business with other third parties, that it does not deem material. Although the ultimate disposition of any such proceedings is not presently determinable, Aventine’s management does not believe that the ultimate resolution of such matters will have a material adverse effect on Aventine’s financial condition, results of operations or cash flows.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Business Summary

Aventine is a leading producer and marketer of ethanol.  Through Aventine’s production facilities, it markets and distributes ethanol to many of the leading energy companies in the United States.  Aventine’s revenues are principally derived from the sale of ethanol and from the sale of other grain related co-products that are produced during the production of ethanol at Aventine’s plants.

Recent Developments

In March of 2014, Aventine sold its ethanol facility located in Mount Vernon, Indiana, which had been idled since 2012 due to negative operating margins at that location. The proceeds from the sale of those assets were used to pay down debt and fund the working capital needed for restarting Aventine’s ethanol facilities located in Aurora, Nebraska. The operating results of Aventine’s Mount Vernon ethanol facility have been classified as discontinued operations for the years ended December 31, 2014 and 2013, respectively.

In 2014, Aventine restarted its 110 million gallon ethanol facility located in Aurora, Nebraska, which had been idled since 2012 due to negative operating margins at that location. In July of 2014, Aventine restarted its 45 million gallon ethanol facility located in Aurora, Nebraska, which had been idled since 2012 due to negative operating margins at that location.

Business Environment

The following discussion includes trends and factors that may affect future operating results.

Commodity Pricing

Aventine’s operations are highly dependent on commodity prices, especially prices for ethanol and corn.

Ethanol. During 2014, Midwest spot ethanol prices averaged approximately $2.18 per gallon compared to an average price of $2.39 per gallon during 2013, a decrease of approximately 9%.  At December 31, 2014, Aventine had contracts for delivery of ethanol totaling 36.0 million gallons through March 31, 2015, of which 20.4 million gallons were based on fixed-price contracts and 15.6 million were at spot prices using Platts and Oil Price Information Service (“OPIS”) indices.

Corn. During 2014, Midwest spot corn prices averaged approximately $4.15 per bushel compared to an average price of $5.78 per bushel during 2013, a decrease of approximately 28%. At December 31, 2014 Aventine had contracts for the purchase of corn totaling 13.6 million bushels through May of 2015, of which 0.9 million bushels were fixed price contracts and 12.7 million bushels were unpriced commitments.

Aventine continuously purchases corn for physical delivery from suppliers using forward purchase contracts in order to assure supply. As Aventine does this, it may sell a like amount of Chicago Board of Trade (“CBOT”) corn futures with similar dates to lock in the basis differential. On occasion, Aventine uses CBOT futures contracts to lock in the price of corn by taking long purchase positions in CBOT contracts in order to reduce Aventine’s risk of price increases. Exchange traded forward contracts for commodities are marked to market each period. Aventine’s forward physical purchases of corn are not marked to market.

Results of Operations

The following discussion summarizes the significant factors affecting Aventine’s consolidated operating results for the years ended December 31, 2014 and 2013 and the years ended December 31, 2013 and 2012. This discussion should be read in conjunction with Aventine’s consolidated financial statements and notes to Aventine’s consolidated financial statements for the years ended December 31, 2014, 2013 and 2012 which are contained herein.

The Year Ended December 31, 2014 Compared With the Year Ended December 31, 2013

Overview

For the years ended December 31, 2014 and 2013, Aventine recognized net income of $16.6 million and a net loss of $74.3 million, respectively. The $90.9 million increase in income in 2014 is primarily due to the increase in the spread between ethanol prices and corn costs, an increase in Aventine’s operating performance and efficiency at its Pekin facilities, the sale of Aventine’s idled ethanol facility located in Mount Vernon, Indiana, and the restart of Aventine’s Aurora facilities.

Sales were generated from the following products:

Ethanol sales increased in the year ended December 31, 2014 compared to the year ended December 31, 2013 primarily due to an increase in ethanol gallons sold partially offset by a decrease in the average price per gallon sold.  During the twelve months of 2014, Aventine produced 208.4 million gallons of ethanol compared to 142.8 million gallons produced during the twelve months ended December 31, 2013. The 65.6 million gallon increase in ethanol production was the result of process improvements and efficiencies at Aventine’s Pekin facilities and the restart of Aventine’s Aurora facilities. Aventine sold 208.1 million gallons of ethanol in 2014 at an average sales price of $2.11 per gallon compared to 140.4 million gallons sold at an average sales price of $2.38 per gallon in 2013.

Co-product revenues of $148.1 million in 2014 increased $1.7 million from $146.4 million in 2013 as a result of an increase in volume sold as well as the addition of corn oil extraction at Aventine’s Pekin facilities. Co-product revenues, as a percentage of corn costs, rose to 50.3% in 2014 from 42.4% in 2013.  This increase was primarily due to strong international demand for Aventine’s feed products, particularly in China, which allowed feed product prices to remain firm while corn prices decreased over the same period of 2014.

Cost of goods sold consists of corn costs, conversion costs (the cost to produce ethanol at Aventine’s facilities), freight and logistics costs and depreciation expense.  Cost of goods sold was $511.3 million and $469.2 million for the years ended December 31, 2014 and 2013, respectively.  The $42.1 million increase in cost of goods sold from 2013 to 2014 is primarily the result of the restart of the Aurora facilities in the second and third quarter of 2014.

Corn costs for the years ended December 31, 2014 and 2013 were $294.4 million and $345.0 million, respectively.  The decrease in Aventine’s costs is primarily due to the decrease in corn prices partially offset by additional bushels ground at its Pekin and Aurora facilities.  Aventine used 71.0 million bushels of corn in production during the twelve months ended December 31, 2014 compared to 53.7 million bushels during 2013. For 2014, corn used in production cost approximately $4.15 per bushel compared to $6.43 per bushel in 2013. The USDA projected the domestic corn crop harvest to be a record 14.2 billion bushels on 83.1 million acres harvested. The record 2014 corn production is anticipated to result in corn ending stocks in the U.S. of approximately 1.9 billion bushels at August 31, 2015.

Due to high corn prices in 2013, Aventine decided to participate in the USDA CCC Sugar program as a means for supplementing, and in some cases, substituting corn needs at Aventine’s ethanol facilities. Aventine began receiving sugar at its ethanol facilities in the fourth quarter of 2013. For the year ended December 31 2014, Aventine used 203.3 million pounds of sugar at a delivered cost of $0.07 per pound compared to 13.3 million pounds of sugar at a delivered cost of $0.13 per pound in 2013.

A summary of Aventine commodity prices for the years ended December 31, 2014 and 2013 has been provided below:

Conversion costs for the years ended December 31, 2014 and 2013 are as follows:

Conversion costs increased by $46.4 million in 2014 as a result of restarting of Aventine’s Aurora facilities and additional maintenance incurred at Aventine’s Pekin facilities that had been previously delayed due to negative margins in the past.

Freight and logistics costs for the years ended December 31, 2014 and 2013 were $35.0 million and $17.8 million, respectively.  The primary reason for the increase in freight and logistics cost in 2014 was the restart of the Aurora facilities. On a per gallon sold basis, freight and logistics costs were $0.17 per ethanol gallon sold and $0.13 per ethanol gallon sold in 2014 and 2013, respectively. The $0.04 per gallon sold increase in cost is primarily driven by the change in the mix of delivery points and an increase in railcar expenses at Aventine’s Aurora facilities.

Depreciation expense from continuing operations for the years ended December 31, 2014 and 2013 was $13.4 million and $10.2 million, respectively. The $3.2 million increase in depreciation expense related to capital improvements at Aventine’s ethanol facilities located in Aurora, Nebraska primarily related to retrofitting the ethanol facility to accept sugar as a feedstock, the addition of grain scales at Aventine’s sites, and the expansion of wet feed storage.

Selling, general and administrative expenses from continuing operations increased to $31.4 million in 2014 as compared to $13.6 million in 2013.  The $17.8 million increase was primarily related to a $10.5 million payment of restricted stock unit awards to Aventine’s directors and certain executive officers in 2014, start-up related costs associated with Aventine’s Aurora facilities and increased legal and consulting costs related to the retirement of the Term Loan A and Term Loan A-1 debt and ongoing litigation.

Interest expense for the years ended December 31, 2014 and 2013 was $14.2 million and $12.9 million, respectively.  Interest expense for 2014 included $12.0 million related to the Term Loan Facility (net of debt forgiveness income), $4.0 million of amortization of debt issuance costs and $0.2 million of other interest expense, partially offset by $2.0 million of capitalized interest.  Interest expense for the year ended December 31, 2013 included $10.9 million related to the Term Loan Facility (net of debt forgiveness income and $2.0 million of amortization of debt issuance costs. The $1.3 million increase in interest was primarily due to the issuance of the Term Loan A-1, offset in part by an increase capitalized interest.

Loss on derivative transactions, net for 2014 includes $11.2 million of net realized and unrealized losses on corn and ethanol derivative contracts versus net realized and unrealized losses in 2013 of $5.5 million. The reason for the $5.7 million increase in losses on derivative transactions is that Aventine maintains a disciplined approach to locking in positive forward margins rather than focusing on the price movements of individual commodities. In periods like 2014 where margins expanded during the year, Aventine experienced losses in its hedging account. Aventine does not mark to market forward physical contracts to purchase corn or sell ethanol as Aventine accounts for these transactions as normal purchases and sales under GAAP.

Other non-operating income (expense) from continuing operations for the years ended December 31, 2014 and 2013 was $0.0 million of expense and $6.3 million of income, respectively. The $6.3 million of income in 2013 primarily related to the settlement of certain litigation.

Facility Operating Data

The following table provides selected key operating statistics for Aventine’s operating facilities.

In mid-2014, Aventine restarted its 110 million gallon ethanol facility located in Aurora, Nebraska, and in the third quarter Aventine restarted its other 45 million gallon ethanol facility in Aurora, Nebraska. Previously, both of these facilities were idled due to negative operating margins at that location.

Change in Working Capital and Cash Flows

Excluding assets held for sale, working capital decreased $6.3 million to $55.0 million at December 31, 2014 from $61.4 million at December 31, 2013 primarily as a result of the prepayments of long-term debt and the restart of Aventine's ethanol facilities in Aurora, Nebraska. Inventories decreased by $7.8 million in 2014 due to the timing of inventory balances at the end of the year and lower commodity prices compared to 2013. Accounts payable increased $9.2 million in 2014 due to increased corn purchases related to higher ethanol production in 2014 compared to 2013. Partially offsetting these decreases in working capital was an $11.6 million increase in accounts receivable in 2014 compared to 2013 due to higher sales volumes related to the restart of Aventine’s ethanol facilities in Aurora, Nebraska and process improvements and efficiencies at Aventine’s Pekin facilities.

At December 31, 2014, Aventine’s cash balance was $33.3 million, which was $7.2 million lower than the 2013 cash balance of $40.5 million:

Cash provided by operating activities of $41.6 million was primarily due to consolidated net income of $16.6 million resulting from increased volumes of ethanol and co-products produced and improved margins related to commodity prices. In addition, Aventine had non-cash adjustments of $7.3 million, related to a $3.3 million loss on the sale of certain coal-fired equipment, the $4.0 million write-off of Aventine’s unamortized loan acquisition costs related to the retirement of the Term Loan A and A-1, and depreciation and amortization expense of $13.4 million. In 2013, cash used in operating activities of $3.3 million was primarily the result of the $74.3 million net loss partially offset by non-cash adjustments of $44.2 million related to the write down of Aventine’s held for sale assets and $18.7 million of depreciation and amortization expense. In addition to the $44.2 million impairment charge, Aventine’s $74.3 million net loss resulted from lower 2013 operating margins due to commodity prices, and the costs associated with carrying Aventine’s idled ethanol facilities located in Aurora, Nebraska, Mount Vernon, Indiana and Canton, Illinois.

Cash provided by Aventine’s investing activities of $12.3 million for the year ended December 31, 2014 was the result of the sale of Aventine’s ethanol facility located in Mount Vernon, Indiana partially offset by $22.4 million of additions to property and equipment primarily attributable to the installation of Aventine’s natural gas fired boilers in Pekin, Illinois and other investments in enhancing Aventine’s ethanol facilities performance. Cash used in investing activities of $7.5 million for the year ended December 31, 2013 consisted of additions to property and equipment primarily including the purchase of corn oil extraction equipment at Aventine’s ethanol facilities located in Pekin, Illinois and other investments in enhancing Aventine’s ethanol facilities performance in 2013.

Cash used in financing activities of $61.1 million resulted from $83.4 million of repayments of Aventine’s Term Loan A and Term Loan A-1 debt, partially offset by advances on Aventine’s loan and security agreement of $23.4 million. Cash provided by financing activities of $34.4 million for the year ended December 31, 2013 resulted from the receipt of proceeds from the issuance of the Term Loan A-1 debt in June of 2013.

Current assets held for sale of $4.9 million at the end of 2014 decreased by $34.7 million compared to 2013 as Aventine sold its idle ethanol facility located in Mount Vernon, Indiana in the first quarter of 2014. The assets held for sale in 2014 relates to the ethanol facility in Canton, Illinois, which is expected to be sold in 2015.

The Year Ended December 31, 2013 Compared With the Year Ended December 31, 2012

Overview

For the year ended December 31, 2013, Aventine recognized a net loss from continuing operations of $15.5 million and a net loss of $58.8 million from discontinued operations for a total net loss of $74.3 million. For the year ended December 31, 2012, Aventine recognized a net loss from continuing operations of $64.6 million and a net loss of $19.3 million from discontinued operations for a total net loss of $83.9 million. The 2013 net loss of $74.3 million net loss includes impairment charges of $44.2 million related to Aventine’s ethanol facilities located in Mount Vernon, Indiana and Canton, Illinois. Excluding the nonrecurring impairment charges, Aventine’s 2013 net loss would have been $30.1 million for the year ended, December 31, 2013.

Aventine’s total revenue was higher for 2013 compared to 2012, primarily due to increased ethanol revenue. For 2013, Aventine sold 140.4 million gallons of ethanol at an average price of $2.38 per gallon within Aventine’s continuing operations. In 2012, Aventine sold 143.5 million gallons at an average price of $2.28 per gallon within continuing operations. In total, ethanol sales from continuing operations were $333.8 million and $327.7 million in 2013 and 2012, respectively. Aventine’s average price per gall on of ethanol sold increased by 4% in 2013 compared to 2012 primarily due to increases in commodity prices and an increase in domestic demand due to lower imports of ethanol into the U.S. in 2013. Sales volume was 3.1 million gallons lower in 2013 compared to 2012 due to the idling of Aventine’s Aurora ethanol facilities in third quarter of 2012.

Co-product sales in 2013 were $146.4 million compared to $152.0 million in 2012. The primary reason for the $5.6 million decrease in co-product revenue was due to the idling of Aventine’s Aurora ethanol facilities in third quarter of 2012. Offsetting lower volumes sold was the addition of corn oil extraction at Aventine’s Pekin ethanol facilities in the second quarter of 2013. Aventine sells its corn oil to the biodiesel industry, and demand for corn oil in the biodiesel industry has weakened due to adequate supplies, which had a negative impact on Aventine’s prices in 2013. In total, Aventine sold $2.5 million in 2013, and did not produce corn oil in 2012.

Cost of goods sold consists of corn costs, conversion costs (the cost to produce ethanol at Aventine’s facilities), freight and logistics costs and depreciation expense. Total cost of goods sold was lower in 2013 compared to 2012 due primarily to lower corn costs. For the year ended December 31, 2013, Aventine’s corn costs were $345.0 million, which was $40.1 million lower than Aventine’s corn costs in 2012 of $385.1 million. Aventine’s average cost per bushel of corn from continuing operations was $6.43 in 2013, which was 9% lower than Aventine’s average cost per bushel in 2012 of $7.04 delivered. This decrease in Aventine’s cost was primarily related to a decrease in the market price for corn, especially during the last half of 2013. The amount of corn harvested in the fall of 2012 was lower due to drought conditions. As a result, corn prices were higher in the first half of 2013 and Aventine also at times had to pay higher basis prices than Aventine has paid in the past in order to secure enough corn to operate. However, the record corn crop harvested in the fall of 2013 lowered the market price of corn as well as corn basis for the remainder of 2013. Aventine consumed approximately the same amount of corn in 2013 and 2012.

Due to the high corn prices in the first half of 2013, Aventine decided to participate in the USDA CCC Sugar program as a means for supplementing, and in some cases, substituting Aventine’s corn needs at Aventine’s ethanol facilities. Aventine began receiving sugar at its ethanol facilities in the fourth quarter of 2013. For the year ended December 31 2013, Aventine’s sugar costs were $1.7 million. Aventine did not use any sugar in 2012.

Conversion costs from continuing operations increased by 7% in 2013 to $90.2 million from $84.1 million in the previous year. The $6.1 million increase was primarily due to additional maintenance incurred at Aventine’s Pekin facilities in 2013 that had been previously delayed due to negative margins in the past and slightly higher utility and chemical costs.

Freight and logistics costs from continuing operations for the years ended December 31, 2013 and 2012 were $17.8 million and $21.1 million, respectively. On a per ethanol gallon sold basis, freight and logistics costs were $0.13 and $0.15 per gallon for 2013 and 2012, respectively. The $0.02 per gallon sold decrease in cost is primarily driven by the change in the mix of delivery points due to the idling of the Mount Vernon and Aurora ethanol facilities, and the close proximity of the Pekin ethanol facilities location to Midwest ethanol market hub in Chicago, Illinois.

Depreciation expense from continuing operations for the years ended December 31, 2013 and 2012 was $10.2 million and $10.0 million, respectively.

Selling, general and administrative expenses from continuing operations decreased to $13.6 million for the year ended December 31, 2013 as compared to $25.2 million for the year ended December 31, 2012.  In 2012, Aventine had increased legal and consulting costs related to the debt restructuring, the reverse stock split, Aventine’s decision to cease voluntarily reporting with the Securities and Exchange Commission, and on-going litigation as well as separation payments to departing senior executives in 2012. 

Interest expense from continuing operations for the years ended 2013 and 2012 was $12.9 million and $21.1 million, respectively. Interest expense for the year ended December 31, 2013 included $10.5 million related to the Term Loan Facility (net of debt forgiveness income), $2.1 million of amortization of debt issuance costs and $0.5 million of other interest expense, partially offset by $0.2 million of capitalized interest. Interest expense for the year ended December 31, 2012 includes $19.5 million related to the Term Loan Facility (net of debt forgiveness income), $3.3 million of amortization of both debt issuance costs and original issue discount costs, and $0.6 million of other interest expense, partially offset by $2.3 million of capitalized interest. The $8.2 million decrease in interest was primarily due to the debt forgiveness from the troubled debt restructuring.

Gain (loss) on derivative transactions, net for 2013 includes $5.5 million of net realized and unrealized losses on corn and ethanol derivative contracts versus net realized and unrealized gains in the year ended December 31, 2012 of $0.7 million. In 2013, Aventine entered into derivative transactions to lock in positive forward margins rather than focusing on the price movements of individual commodities. When margins expand like they did in the last six months of 2013, Aventine experienced losses in Aventine’s hedging account. Aventine does not mark to market forward physical contracts to purchase corn or sell ethanol as Aventine accounts for these transactions as normal purchases and sales under GAAP.

Net loss – discontinued operations totaled $58.8 million and $19.3 million for the years ended December 31, 2013 and 2012, respectively. Net loss – discontinued operations includes the results of Aventine’s ethanol facilities located in Mount Vernon, Indiana and Canton, Illinois. Both of these ethanol facilities were idle in 2013, and the ethanol facility located in Canton, Illinois was idle for all of 2012. The $39.5 million increase in Net loss – discontinued operations is due to a $22.8 million impairment charge related to Aventine’s ethanol facility in Mount Vernon, Indiana and a $21.3 million impairment charge related to Aventine’s ethanol facility located in Canton, Illinois. Excluding the $22.8 million impairment charge, the net loss at Mount Vernon improved by $3.0 million from a $17.1 million loss in 2012 to $14.1 million loss in 2013. This primarily resulted from the decision to cold idle the facility in 2013 in order to minimize the impact of negative margins at that location. The net loss at Aventine’s Canton ethanol facility decreased from $2.2 million in 2012 to $0.6 million in 2013 after excluding the $21.3 million impairment charge. This improvement was the result of continued cost cutting measures at that location.

Facility Operating Data

The following table provides selected key operating statistics for Aventine’s operating facilities.

Change in Working Capital and Cash Flows

Excluding assets held for sale, working capital increased $22.5 million for the year ended December 31, 2013 to $61.3 million from $38.9 million at December 31, 2012 as a result of the proceeds from the issuance of the Term Loan A-1 loans and operating margin improvements. Inventories increased $4.3 million due to the timing of inventory balances at the end of the year, the addition of corn oil at Aventine’s Pekin facilities and slightly higher commodity prices compared to 2012. Partially offsetting this increase in working capital was a $2.5 million decrease in accounts payable due to the timing of purchases and payments and the idling of Aventine’s ethanol facilities located in Aurora, Nebraska.

At December 31, 2013, Aventine’s cash balance was $40.4 million, which was $23.5 million higher than the 2012 cash balance of $16.9 million:

Cash used in operating activities was $3.3 million and $36.2 million, for the years ended December 31, 2013 and 2012, respectively. The $32.9 million change in cash used in operating activities was due to a lower net loss primarily from continuing operations in 2013 compared to 2012. In 2013, Aventine improved its operating performance and efficiency at its Pekin facilities, which lowered its operating costs. In addition, 2013 operating margins improved due to beneficial movements in commodity prices compared to 2012. Finally, Aventine’s ethanol plants located in Mount Vernon, Indiana and Aurora, Nebraska were idle for all of 2013. This also lowered operating costs compared to 2012.

Cash used in investing activities of $7.5 million related to additions to property and equipment primarily attributable to the purchase of corn oil extraction equipment at Aventine’s ethanol facilities located in Pekin, Illinois and other investments in enhancing Aventine’s ethanol facilities’ performance in 2013. Cash used in investing activities of $10.6 million in 2012 also related to capital improvements primarily at Aventine’s ethanol facilities located in Aurora, Nebraska.

Cash provided by financing activities of $34.4 million was the result of the receipt of proceeds from the issuance of the Term Loan A-1 debt in June of 2013. In 2012, Aventine had $27.6 million of cash provided by financing activities related to the debt restructuring in September of 2012 which included receiving proceeds from the issuance of the Term Loan A debt.

Current assets held for sale of $39.6 million at the end of 2013 represents assets associated with the idle ethanol facilities located in Mount Vernon, Indiana and Canton, Illinois. As part of Aventine’s strategic plan to reduce idle costs, Aventine entered a sales process for these ethanol facilities in 2013.

Liquidity and Capital Resources

At December 31, 2014, Aventine had $33.3 million in cash and equivalents, and up to an additional $10.1 million available under Aventine’s Revolving Facility.

Debt

Loan and Security Agreement

Aventine maintains a revolving line of credit with an availability maximum of $40.0 million. The credit facility expires on July 27, 2017. Interest accrues under the credit facility at a rate equal to LIBOR plus 6%. The credit facility’s monthly unused line fee is 0.50% of the amount by which the maximum credit under the facility exceeds the average daily balance. The loan agreement contains customary affirmative and negative covenants including but not limited to, meeting certain financial covenants including but not limited to maintaining a cash balance of $5 million and a fixed charge coverage ratio of at least 1.1 to 1.0. At December 31, 2014, Aventine had $19.1 million of loan advances and $5.6 million in letters of credit outstanding under the agreement and is in compliance with the financial covenants.

Term Loan Debt

The payoff amount of Aventine’s Term Loan B debt at December 31, 2014 is $140.3 million. Interest on Term Loan B may be paid in cash at a 10.5% rate or paid-in-kind at a 15% interest rate. If Aventine elects paid-in-kind interest, the interest is capitalized at the end of each quarter. The maturity date for Term Loan B is September 24, 2017. Aventine has always elected paid-in-kind interest on its Term Loan B debt, and elected paid-in-kind interest for amounts due on December 31, 2014.  The Term Loan B is secured with substantially all of Aventine’s fixed assets and contains customary affirmative and negative covenants including but not limited to, meeting certain financial covenants including but not limited to maintaining a cash balance of $5 million. As of the date of this joint proxy statement/prospectus, Aventine is in compliance with its financial covenants.

Contractual Cash Obligations

In addition to Aventine’s long-term debt obligations, Aventine has certain other contractual cash obligations and commitments. The following table provides information regarding Aventine’s consolidated contractual obligations and approximate commitments as of December 31, 2014:

__________

Critical Accounting Policies

Aventine uses estimates and assumptions in preparing its financial statements in accordance with U.S. generally accepted accounting principles. These estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported revenues and expenses. Of the significant accounting policies described in the notes to Aventine’s financial statements, Aventine believes that the following are the most critical:

Revenue Recognition

Revenue from the sale of Aventine’s products is recognized at the time title to the product and all risks of ownership transfer to the customers. The time of transfer is defined in the specific sales agreement; however, it generally occurs upon shipment, loading of the products or when the customer picks up Aventine’s products. Collectability of revenue is reasonably assured based on historical evidence of collectability between Aventine and its customers. Interest income is recognized as earned.

The majority of sales are reported gross, inclusive of freight costs being paid to Aventine. Aventine recognizes freight costs in its cost of goods sold. When product is sold F.O.B plant and freight is paid by Aventine’s customer, Aventine excludes these costs from its financial statements.

Commodities Contracts, Derivative Instruments and Hedging Activities

Aventine evaluates contracts to determine whether the contracts are derivative instruments. Certain contracts that meet the definition of a derivative may be exempted from derivative accounting and treated as normal purchases or normal sales if documented as such. Normal purchases and normal sales are contracts that provide for the purchase or sale of something other than a financial instrument or derivative instrument that will be delivered in physical quantities expected to be used or sold over a reasonable period in the normal course of business.

Aventine enters into short-term cash, option and futures contracts as a means of securing corn and natural gas for its ethanol plants and managing exposure to changes in commodity and energy prices. Aventine also enters into derivative contracts to hedge its exposure to price risk as it relates to ethanol sales. As part of Aventine’s risk management process, Aventine uses futures and option contracts through regulated commodity exchanges or through over-the-counter markets to manage Aventine’s risk. All of Aventine’s derivatives, other than those excluded under the normal purchases and sales exclusion, are designated derivatives, with changes in fair value recognized in net income. Although these contracts are economic hedges of specified risks, they are not designated or accounted for as hedging instruments.

Realized and unrealized gains and losses related to derivative contracts related to corn, ethanol and natural gas are included as gain (loss) on derivative transactions in the accompanying financial statements. The fair values of these contracts are presented on the accompanying balance sheet as derivative financial instruments.

Off-Balance Sheet Arrangements

Aventine currently has no off-balance sheet arrangements.

Effects of Inflation

The impact of inflation was not significant to Aventine’s financial condition or results of operations for the years ended December 31, 2014 and 2013.

Market Prices of and Dividends on Aventine Common Stock

Aventine common stock trades from time to time on the OTCBB under the symbol “AVRW” and in unreported transactions. As of May 1, 2015, Aventine common stock was held by approximately 53 stockholders of record. No cash dividends have been paid on Aventine common stock during the two most recent fiscal years, and Aventine does not intend to pay cash dividends on its common stock in the immediate future.

The following table sets forth the reported high and low sales prices of shares of Aventine common stock on the OTCBB. The high and low sales prices are based on intraday sales for the periods reported. There is a limited historic public trading market for Aventine’s common stock. This information has been obtained from the Bloomberg Professional service. The over-the-counter market quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not necessarily represent actual transactions.